On balance: How to save AND spend
Looking back over my last few posts, I feel like I’ve been harping a lot on cutting spending, listing all the things you should feel bad about spending your money on and (hopefully) leaving you wracked with guilt, kind of like an angry Catholic nun but with money.
But managing your money isn’t all about living a penurious lifestyle dressed in sackcloth and eating gruel. What I’m talking about is conscious spending.
Conscious spending (not to be confused with it’s now-famous cousin, conscious uncoupling) is about spending with intention. When you track your spending and cut out all the non-necessities, you’re well on your way to conscious spending, but to round it off, you also need to spend intentionally on the things that matter to you.
Now, I don’t know your particular situation. You may be a parent whose priority is to spend money on enriching experiences for your child. You may be a huge music fan, whose priority is to spend money on vinyl records and indie shows (you filthy hipster). You might be a deep woods survivalist whose priority is spending money on those tablets that purify water for when civilization collapses (soon probably!). Whoever you are, you know what really matters to you and you know what you really need in your life, and managing your money smart means making room for that.
So let’s say you are all over the whole tracking your spending thing, and that you’ve identified all the areas where you can cut your spending. You are now in a position to start spending smart.
Step one: Pay yourself first
I’m pretty sure you’ve heard this a million times (or maybe not, maybe you’ve only ever read Mashable posts about Disney princesses, I don’t know), but your first priority with money should be to “pay yourself” which means putting money into your savings. If you’re working on an emergency savings account, start each month by putting your goal amount of money into that account. Your retirement savings and any other savings you’re doing should go here too.
Step two: Pay your debts
Getting rid of all your bad debts, if you have them, should be a top priority for you. So you should consciously work on this every month, and stick to your debt pay-down plan. This is really important. Debt is a giant money suck that will leech your cash as long as you let it, so pay it off.
Step three: Make room for what matters
This is the fun part. What matters to you? I really love to travel – I shoot for at least one trip abroad a year. However, I don’t exactly earn “travel the world” money. I make travel happen by spending much less on other stuff. As I mentioned before, I don’t have a car. I spend less than 1/3 of my take-home salary on housing each month. I don’t buy a lot of clothes, I don’t eat out very often, and I cut corners wherever I can.
None of this feels like a hardship, because I know that the spare money I save up is going to be spent on awesome things like exploring ancient Turkish ruins or strolling along the Seine.
Your priorities are probably really different from mine, because I am selfish and self-indulgent. You might really want to live in a lovely, well-decorated house, say. And you can, if you are smart about spending on other stuff.
To me, this approach to money is far more rewarding than the short-term gratification of spending on whatever seems fun on a given day (Taco Bell! Shoes! A big ball of twine!). Having a nice savings cushion makes you feel secure, having no debt makes you feel in control, and spending on the things that really matter to you make you feel like you’re living life right. To me, that’s totally worth it.