A spending plan can be easy to follow when it’s designed so you spend money on things that are most important to you. The first step to laying out a spending plan that will stick is to give thought to the things that truly make you happy.
A Spending Plan That Works
Your money is best used to support the things that matter most to you, and a spending plan that works will allow you to make tradeoffs that feel good. If you think in terms of spending phases, then over the course of a lifetime, it's likely you can have everything you want - it's just maybe can’t have it all at once.
What do I mean by that? Let me give you an example. At one point in my life, I decided I wanted a luxury car. I was pretty sure I wanted an Infiniti FX 45, but just to be sure, I rented one for a weekend. I loved it, so I bought one. I felt good every single time I got in that car. But not long after purchasing it I took up a hobby of riding motorcross. My luxury car made me feel special, but it wasn’t so practical for hauling motorcycles around. After two wonderful years of driving it, I traded it in for an older Nissan Xterra. And I was equally happy. I was using my resources to best support activities that made me happy (and I wasn’t so worried about scratches and dings any more).
Over the course of a lifetime, you can have the luxury car, and the sport utility vehicle, and the convertible, if you so desire, it's just maybe you can't have them all at once. The same principle goes for many spending choices you make.
A Values Based Spending Plan
When you use your assets to support your deepest most values, values that go far beyond what car you drive, spending decisions become easy. Doing this requires some soul searching.
Do you want to travel more? Now… do you really want to travel more, or is it just a far off dream? What if you could make it happen? What would you do to make it happen? What about selling your home and renting a small apartment; would you do this if it freed up the funds to travel for a year? If the decision is hard, perhaps your values aren’t clear yet, or perhaps you are dealing with two equally important values.
When Values Compete For Your Money
When values compete for your money, if you are willing to look at life in terms of phases, you may find you face a world of choices you never thought possible before. What if you were willing to downsize and take only public transportation for a year, which meant saving enough money to take a year off, or put a down payment on a dream home, or pay cash for a car?
As one dad said to his daughter in my blog When $300 Costs You $40,000 "If you are willing to do what no one else will do for the next 10 years, you will be able to do what no one else can do for the rest of your life."
That same rule applies at any age and for any spending plan you create. If you are willing to do what no one else will do for a month, or a year, what would that allow you to do with you money, and is that tradeoff acceptable to you? When your values are clear, you'll know the answer.
Make Intentional Choices With Your Spending
What makes you tick inside? When do you glow? Do your spending habits reflect these passions? Or do you spend habitually, perhaps on things that don’t have deep meaning for you?
If you’re not sure where your money goes, you’ll want to take time to dive in and examine your habits. Get out twelve months worth of bank statements and credit cards, and a pack of highlighters, and start categorizing things.
What do you see? If you were an outsider observing your own bank and credit card statements what would you say about you? What changes do you want to make?
If you decide you want to spend more now, and save very little, is there anything wrong with that? Some may think so; in those cases they are placing their own values on you. If you save little now, you may not be able to continue to spend later in life - that is your personal choice. Your spending plan can be flexible enough to allow you to spend more or less during different phases of your life.
Regardless of what you decide, make sure you consciously decide. Don’t let your spending habits take over, as if they have a mind and will of their own. Instead, make intentional choices about what you want your money to do for you.