It’s the holiday season, and I’m a personal finance guy — shouldn’t I be harping on The Reason For The Season, and It’s Not How Much You Spend That Matters, and all that? Is it time to chuck all that stuff and go back to good ol’ fashioned consumerism, and forget this whole frugality business?
Not exactly. But every now and then, it’s good to take a step back and remind ourselves what being fiscally responsible is all about.
The end goal of personal finance isn’t to spend as little as humanly possible. Heck, that’s not even the beginning. But frugality has made a comeback, and so we’re constantly being deluged with “10 ways to save on clothes” and “5 ways to save on travel expenses”. This is handy, but it’s not an end unto itself. The goal is to spend less on some things so you can spend more on other things.
That is, after all, the point of budgeting; to figure out what your values are and assign a numerical value to them. You’re going to value some things more than others — why not spend more on them? After a talk I gave earlier this year in which I mentioned the value curve, I was approached afterwards by a woman who said that she had decided to spend more on travel, not less. She told me this with a look of chagrin, as if expecting disapproval; on the contrary, I thought this was fantastic! To be mindful enough, awake enough, to be able to make your own decisions about what you value and align your money accordingly — this is what personal finance is all about!
A handful of assorted morsels to chew over on this topic:
Consider spending your money where you spend your time. I’m a big fan of Lifehacker, and they recently posted an excellent article on this subject. I spend a lot of time on my computer, and when I do have free time, I love to play video games — so I conscientiously put money into my PC, making it as fast and reliable as possible. You spend all day in your clothes — why not make them comfortable? And if your mattress is messing up your sleep patterns, for the sake of everything that’s holy (not to mention your sanity, productivity, health, and general well-being), get a better one!
If you’re looking for education or self-improvement, don’t underestimate the value of a tutor or coach. Full disclosure: that includes a personal finance coach, of course, but Get Rich Slowly will back me up on this one. Money for an expert who can hold you accountable is extremely well-spent, especially if you find that motivation is an issue (and it so often is!). And the really good coaches will not only teach and motivate you, but teach you how to learn and motivate yourself!
Don’t just put money into a generic “savings account”. This is a specific example of “give every dollar a job”, but it’s an important enough to single out. When you have a pile of money that’s just sitting there, waiting for you to use, you’re going to use it sooner rather than later. This isn’t inherently a bad thing, except the thing you buy sooner may not be as valuable to you as the thing you would have bought later. Sure, remodeling is great — you spend a lot of time in your home, after all — but would that money be better spent on a mini-retirement, or a new car, or even just specifically set aside as emergency savings in case you experience, ahem, cash flow difficulties? Maybe it would be — but having different savings accounts for different goals forces you to ask yourself the question, and gives you an extra barrier to pulling money out at random (“I was really looking forward to that walking tour of England…maybe I can put this other thing off for a year”).
Be generous. Give your money away (mindfully, not willy-nilly — Christmas debt doesn’t do anyone any favors, the gospel of consumerism notwithstanding). But not just for the holidays. Tip 20%. Give money to your church and organizations you care about. Spend money on things that don’t benefit you directly. The unfortunate part of the recent rise in frugality is that it’s based on fear, and generosity is the best way to actively combat that. I often come back to idea that you should own your money, not the other way around, and giving it away is a great way to show it who’s boss.