Where you spend money reflects your values.
Steve Pavlina recently posted on his blog asking people’s opinions about what he should do with excess money (my term, not his). Congratulations to Steve for achieving such financial abundance. Steve is in the wonderful position of making significantly more money than he needs to live. We’re not just talking living below your means, but rather living below your means with a lot to spare. Once you’re in this position you can really use money to build a legacy. His question brings up an interesting point that applies not only to people with financial abundance but to even those buried in debt; where you spend money is a reflection of your values.
How much do you value fast food?
It’s true, look at where you spend your money and you’ll have a pretty good idea about what you value. Some might reject this idea; “I don’t value fast food THAT much.” But when the rubber hits the road, you chose to eat out at McDonalds rather than going to a movie, buying a book, or saving that money. You had to make a trade off and the fast food won.
What trade-offs are you willing to make?
In fact, the process of budgeting is a process of making trade-offs. Do you really want to save for that new piece of furniture? What are you willing to give up to get it; will you spend less on grocieries, eating out, entertainment, or something else? If you have financial abundance maybe you have to decide that the piece of furniture is more important than saving an extra thousand dollars. There is a finite amount of money and it can only be spent once.
Use your finances to refine your values
Looking at your spending can be a great way to reflect on what you really want. After looking at where your money goes, do you think it reflects your real values? If not, maybe you can get some insight into what trade-offs you can make to align your spending with your percieved values.
What should I do with my bonus?
Recently my wife and I recieved a bonus from work and were deciding where it should go. Among the options were paying off debt, going on a family vacation, or buying a miriad of items on our ever-growing wish list. Paying off debt was a leading option because we’re trying to agressively get out of debt right now. Getting some of our “things” was also a luring option because there were some things we could get with a large chunk that we couldn’t usually buy otherwise. In the end we chose to put our money towards travel.
The decision actually surprised us because we usually view vacations as being very dispensable. There’s really nothing physical to show for them in the end vs. buying something or reducing debt which are much more tangible. But at the same time, we haven’t gone on a true vacation for a while and we realized that having the shared experiences and memories of a vacation were more important than paying off debt or buying a “thing.” We decided that from now on we’re going to have at least one full-fledged vacation a year. It may not be the best “financial” decision, but it is a more accurate reflection of our values.
It’s important to note that we may not make the same decision every time. Had we already been on a vacation or two, or had we not already agressively been paying off debt, we may have chosen another option. The point is that we were able to utilize our finances and the budgeting process to clarify our family values.
One of the reasons finances can be such a subject of contention in marriages is that they’re tied so strongly to values. Conflicting values are manifest in our finances. Financial arguments are almost always values arguments in disguise. That’s a big generalization, but think about it yourself. Do you really care how a green piece of paper is distributed? What you really care about is that you can obtain what you value. If your spouse disagrees, it’s a reflection on how much they care about you and your values. No wonder financial discussions can be so financially charged.
What to do with excess money? Let your values decide.
So back to Steve’s question; what should he do with his excess? Spend it on what you value. The great thing for him is that he can start manifesting his values through his finances with great gusto. Do you value security? With such financial abundance you can quickly pay off all your debts and save a large nest egg. Do you value serving others? Donate large sums to your favorite cause. Do you value entertainment? Get all the gadgets and toys you’ve always wanted. In any case, start with what you truly, conciously value and direct the money to that end.
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