spending money wisely

7 Ways to Make Sure You’re Spending Money Wisely

Who isn’t all for making money, saving, investing, growing, and spending money?

Money Is Important

We all need money for life, survival, fun, and peace of mind.

However, is it an end-all and the most important thing? Nope.

Some of the wealthiest people have the saddest lives. Some of the highest earners have the worst spending habits. While it may seem that they have financial security, they are just accumulating credit card debt and have no savings for a rainy day.

Others work hard to save money and pay attention to their household budgets yet are still dissatisfied. That is because when it comes to handling your pocket money and spending on personal things, what you are spending money on matters.

Why Are Some People So Well Off, Yet So Unhappy?

To start, being well off and making a lot of money does not equal happiness. So while many of us out there are pursuing higher pay or multiple income streams, there comes the point where more does not equal better.

Studies have shown that earning beyond $75,000 per year does not make much difference in emotional well-being. More recently, new data has challenged this, stating that more money equals happiness as it affords us the things and experiences we want. Work stressors can interfere with happiness at much higher levels of income (e.g., above $200k). What makes a difference is the values we carry as individuals.

We must recognize and acknowledge these facts to avoid getting so carried away in making money that we lose our passion for life or lose perspective on what matters.

How You Spend Money Matters

While earnings don’t equal happiness, spending money also does not correlate with happiness. Instead, it’s what we’re spending money on (which links to our values) and how we manage it that contributes to satisfaction.

Some questions to consider:

  • Are your purchases adding value to your lives?
  • Do you make purchases based on what others are doing or based on personal values? Can you afford what you need AND still have something left over for fun?
  • Do personal expenses each month stress us out because we aren’t sure if we’ll be able to pay them?

We should not be pursuing some societal standard of how we live our lives, which includes how we spend money.

This article assumes that you are saving and investing as you should be, reviews methods to keep personal spending triggers in check, and helps ensure that you are spending wisely.

7 Ways to Check if You’re Spending Money Wisely

It’s essential to break out of this cycle of spending money unnecessarily and looking for happiness in material goods; instead, we should be critiquing our spending and making sure that when we part with our money, we receive as much benefit in the exchange. In addition, our values should drive our choices and financial goals, not what anyone else tells us to value or do.

On top of all of that, there are definite steps you can take to ensure you don’t overspend if you don’t need to.

1- Is This Purchase Going to Make You Happy?

Instead of looking around and seeing what other people are doing, take a step back and figure out what makes us, as individuals, happy.

Some people are obsessed with handbags, shoes, and accessories. Others love to travel and prefer to spend all their funds abroad. Still, others prefer fast cars and nice clothes.

Happiness is an individual choice. There is no right or wrong answer. When you focus on what works for you, you’ll reduce the wasteful spending elsewhere.

2 –Don’t Compare What You Have With Anyone Else

Avoiding comparison is difficult. We are inundated with comparisons in real life and online. But if you can get to a point where you can ignore what anyone else is doing, your happiness meter skyrockets.

In addition, we must recognize that we each are traveling on our own paths. Your beginning does not compare to another person’s middle. Put another way, two people with the same goals will have different methods and experiences that drive them; thus, the timing and level of success that each achieves will be very different.

In other words, we are each our own, with our own strengths and weaknesses, which are incomparable to others.

You can be inspired by what others are doing and what others have and want those things for yourself; however, when and how you achieve them will be completely different. In fact, it SHOULD be. When it comes to life, you should be living it your way, on your own terms.

The same goes for how you go about spending money and what you define as being important to you.

3 – Experiences Over Material Things.

Where is the bulk of your spending going? Are you more focused on material goods or on purchasing experiences? 

A plethora of articles and studies exist describing how we need to focus on experiences versus you versus physical items as they can contribute to personal growth, teach valuable life lessons and change your perspective.

Traveling is probably the ultimate experience, but not the only one to consider. You don’t need a fancy Instagram-crazy trip to Greece. You just need to spend money and time in ways that allow you to try new things and step out of your comfort zone.

4 – With Material Goods, Choose Quality Over Quantity

While owning a lot of things might sound good because more is considered to be better, the opposite is true. It’s better to own less. Your home will be less crowded, and you’re less likely to have things in your home that you don’t use (which is super wasteful).

On that note, the focus on material goods should be on quality, not quantity.

It’s important to keep in mind certain things:

  • Some high-quality items may cost more upfront but may also last much longer. Ultimately, this saves money and elevates your lifestyle (if that’s important to you). Put this into practice with clothes, shoes (they’ll last longer), and big-ticket items like furniture.
  • Figure out which luxury items for you are a must and are not just keeping up with the Jones’s. You’ll get a better idea of where your money will give you happiness and satisfaction, and you’ll spend less time running after things to show off to other people. 

No matter what, make it a point to take care of what you buy. Items that are cared for and maintained will last far longer than those that are not.

5- Shop With Intention & Stick To A Budget

Try not to buy anything new unless you really need it. Doing so reduces unnecessary spending and helps you focus on getting the best price and quality of the items you do need

In addition, it’s not enough to afford or want something. You should have a reason, a passion, and a love for what you are getting. It should somehow enhance or HELP your life; otherwise, your purchases will just become a burden. For instance, that fancy car that you feel so-so about–not worth the money pit to impress your colleagues and neighbors.

Let’s stop spending unnecessarily on things that don’t help us or retain value; let’s first budget for what we really need and be intentional with what we want.

 6 – Don’t Overpay For Life’s Essentials

If you have conversations with people about their regular spending, you’ll be amazed at what people don’t know or haven’t thought about where their money goes. Something simple, like groceries, can cost so much money if you don’t look around. Some will drive a few miles to fill up their tanks at Costco because it’s much cheaper there.

Life essentials like gas and groceries are just two examples of where we may ignore where we are spending money because they are essential. You need them anyway. However, taking notes and shopping around can make a big difference.

These categories are probably the hardest to alter simply because life responsibilities get in the way of putting this into action. Consider it food for thought; you don’t need to scrutinize every single item you purchase; however, if you DO have the time and notice differences in the marketplace, this may be worth paying attention to.

7 – Make Big Life Purchases Only When You’re Truly Ready

This post isn’t meant to deter you from purchasing things you need, want or can afford. It’s meant to make you think twice about WHY you’re spending money and where.

Life purchases like buying a house, rental property, or a nice car should be aligned with your life goals and financial status. Think about your situation and goals, and take the leap only if you’re ready to find something that works!

How Can You Start Shifting Your Spending?

Kickstart adjusting your spending by doing the following.

Review Your Credit Card Statements

Most online statements break down your spending, giving you an idea of where most of your expenses are: travel, food, entertainment, gas, etc. You can take it further and print out statements from the past three months. If you tend to use your debit card more, print out your bank account statements and do this.

Highlight those life’s essentials all the same color and tally them up. Do the same with food, divide it up into groceries and eating out, and tally that up. Keep going with the different areas of life. After, you’ll have a better idea of where you have a spending problem and can devise a plan to fix it.

Another thing to look for is items for which you can potentially re-negotiate prices. If you pay for cable/internet, there may be a deal going on with your provider that you can take advantage of, OR you can ask around other companies and see how much you’ll be able to save!

Clean Out Your Home & Get Organized

This takes time, but it can help you see how much you already own and can motivate you to stop spending on things you don’t need because you probably already have them!

For example, hang up everything you own in your closet and arrange it by color. When doing this, you’ll see how many black shirts you have, which ones look a little rough and which you’ve forgotten about. Arranging by color also lets you know what’s missing and where to fill in the gaps. 

Getting organized can help eliminate waste and help you focus when you go shopping; you can now concentrate on missing areas of your wardrobe. (Another idea with your clothes is to create capsule wardrobes for yourself)

Make Clear-Cut Budgets

When it comes to planning out your budget, Johnathan Bird from Farnam Financial states:

Your written budget must have four parts: Income, Taxes, Savings, and Spending. Notice that spending comes last.

Save before you spend, not the other way around.

It’s also important to itemize your spending into broad categories such as Home expenses, Groceries, Restaurants, Car, Clothes, Travel, Streaming.

In other words, have a number in mind for purchases before you shop and spend your income. If you have no idea what to expect regarding cost, do some research and compare prices at different retailers. This is especially important for more expensive items.

If you go into it with a budget beforehand, you’ll likely stick to it.

Save For Big-Ticket Items

If you are trying to avoid charging everything to your credit card and/or accumulating credit card debt, don’t go shopping until you have the needed amount. Again, this is especially true for big-ticket items.

Final Thoughts

Be intentional about your spending and make the best decisions for you and what you want. Look for the best deals and quality. You have hard-earned money. If you cut back on bad habits and focus on spending money wisely, you will keep items longer, increase their longevity, and come to value and respect them more.

When you spend in ways that bring you true happiness, you also maximize your purchase value.

Just because you CAN afford it, doesn’t mean you should buy it. Just because someone else is doing it, doesn’t mean it will bring you happiness.

~Dr. Vig

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