You’ll probably agree with me on this…
Finding balance is tough, especially when it comes to money.
So when is rewarding yourself worth it?
When you’ve finally figured out how to manage your own money and put yourself on a path towards financial success, the challenge becomes finding the right balance between sticking to your goals and enjoying life along the way.
I’m all about saving money and sticking the the plan. But sometimes treating yourself is worth it. Sometimes paying more for convenience is worth it. And I believe that giving to a cause you care about is absolutely worth it.
Are you Good at Managing your Money?
We all have our splurges, our vices, or the things we love to spend money on that we maybe shouldn’t.
There’s a quote I read recently, “Since when did being good at managing money mean never spending it.” At first I brushed it off as one of those cliches that people come up with to make themselves feel better about not saving any money.
But this quote continued to eat at me until I started to ask myself, “Am I good at spending money?”
Honestly, I’ve never been much of a spender which might be why I’m such a good saver. This trait has served me tremendously over my 24 years. In fact, I love saving so much that I just wrote a massive post of 150 Proven Ways to Save Money.
The truth is, I hate spending money on myself. I hate spending money on others.
I don’t even enjoy spending money on my wife who I am crazy in love with and is the most incredible person I know.
Embracing Lifestyle Inflation
Most of the time I just don’t enjoy buying new clothes, gifts, cars, furniture, or expensive food. But in 2018, one of my goals is to actually let our lifestyle inflate a little bit. I know that sounds crazy coming from a finance blogger when rule number 1 is to NOT change your lifestyle as you make more money.
But here me out…
We started saving money and adopting an ultra-frugal lifestyle out of necessity. I was unemployed and about to start grad school while my wife was working as an entry-level receptionist. Times were tough and money was tight.
As our yearly income has moved from $41,000 to over $90,000 a year, not much has changed. We live in the same place, eat mostly the same food, have maybe 1-2 newer furniture items, and we got a dog. We’ve actually done a pretty incredible job at preventing lifestyle inflation.
Mini-Rant over… My goal here isn’t to convince you to start spending more, because let’s face it, most people’s lifestyles are already super inflated and they already spend WAY more than they should.
While there may not be many absolute, definitive right and wrong ways to spend money, there are some “best practices” when it comes to personal finance and managing your money.
I want to share with you a simple framework that we’re using as we increase our spending a little bit in 2018. This one small change in the way you think will help you make much wiser decisions on the way you spend and approach money.
Make your Spending Scalable
If you’re going to increase your spending, the key is to make it scalable depending on your circumstances.
If you’re going to purposefully increase your spending, then you’ve got to make sure that it can be reduced when times are tough or if your life circumstances turn south.
You see, the mistake most people make is that as soon as they experience an increase in income, they go out and take on a $30,000 loan to buy a fancy new car. Then, something awful happens and that person is stuck with a $500 a month car payment that they can’t get rid of.
You don’t want to be that person.
People rarely expect things to go wrong. But one of my personal goals in leading my family is to make our finances as resilient as possible. I don’t want there to be one single point of failure in our finances. For us, this means having an emergency fund, a sinking fund, life insurance, and living on less than 50% of our income.
If you’re going to intentionally let your lifestyle inflate, then you want, should, have to make sure that you can decrease your spending just as fast as you increased it. If you buy a bigger house, rent a fancier apartment, or drive a brand new car, those are spending decisions that can’t be changed quickly.
Two Types of Luxuries to Avoid:
1. High Recurring Expenses or Costs to enjoy
The first kind of luxury you want to avoid is anything that will continue to cost you a large amount of money over and over. Think about expensive subscriptions, or things you can’t enjoy unless you continue to pay.
The big kicker in this category is housing, but for this section, specifically renting. Whether you just graduated college or you recently got married and are looking for a place to live, please take my advice. Find and rent the cheapest place you are willing to live.
Whenever you lock in your first job and start bringing in some real income it is tempting to live in the cool part of town in a swanky townhome or apartment. I get it, trust me.
My wife and I wish we had a cheaper place to live, but guess what? When I spent 4 months unemployed we were incredibly thankful we had already found a cheap housing option.
Once I was able to get another job we could have moved, but the place we live now saves us anywhere from $600 to $1,000 a month compared to our friends. We’re throwing that money into investments that will allow us to reach our goals. We’re willing to sacrifice a slightly newer and bigger place to live in our newlywed years so that when we start to have kids and raise a family, we can provide for them well.
We also have security here. It is affordable enough that either of our incomes could allow us to live here on our own.
2. Debt: Cars, Mortgage
The second one doesn’t take much explaining, but it is worth saying.
If you’re going to intentionally increase your spending, don’t get yourself stuck with a high monthly payment. Instead, go out to dinner with friends, take a vacation with your spouse, or make time to go to a concert.
If you take out a $30,000 loan on a new car and lose your job 6 months later, you are still responsible for making the monthly payments.
I don’t know what it is, but something about earning a paycheck for the first time makes people think they are wealthy.
When you start to make money, don’t take on debt.
The Right Type of Luxury
It should go without saying, but before anyone calls me out in the comments… I totally believe that there are plenty of ways to improve your quality of life without spending any money. My wife and I are really intentional about pursuing each other and most of the ways we invest in our marriage are free.
6 Types Of Spending that I Personally Think Are Worth It:
1. Things you actually need
2. Something you’ve wanted for a long time
3. Memories and Experiences
5. Convenience / buying back time
6. Building a business
Just for kicks, I thought it’d be fun to share some of our planned spending for 2018.
New Jeans: Going from part-time to full-time work so I’ll need a few more pairs of jeans for work wear. I recently made the switch from wranglers to Levi’s and they are life-changing! 10x more comfortable and actually fit me well.
Standing Desk: I spend about 80% of my day sitting down. Over the last year I’ve had low back, hip, and hamstring issues. Way too young to be dealing with those!
Vacation with friends: I’m not sure where we’re heading, but we’ve finally got some rewards points we earned from credit card hacking. Thanks ChooseFI for teaching us how!
Shoes for squatting: I spend 3-4 days a week in the gym and I’m currently using shoes that are legitimately 10 years old. It’s time to start fresh.
HEB InstantCart: My wife and I actually love grocery shopping! Doing the instant cart does save us an hour a week and only costs $5 each time. Considering that we usually add at least $10 worth of food to our grocery cart whenever we go, I think we’ll come out ahead on this one.
Microsoft Office: Boring, but needed.
Zondervan Exegetical Commentary Series: This is something I’m excited about! As a pastor and seminary student I love having accurate and understandable resources on God’s word.
But here’s the key thing for those who have read this far:
We are able to make these changes because we have proven that we are able to stick to a budget. We live on less than half of our income. Our yearly spending is currently around 40% of our income. We have found hundreds of ways to save money and reduce our spending so that we have the margin to reward ourselves.
If you want to make 2018 a better year for you financially, make some drastic budget cuts, and then add back in where you need it most.
Lastly, I’d love to hear from you! Do me a huge favor and share in the comments below some of the ways you spend money that are worth it to you. And better yet, share some of your money-saving habits that allow you to do that!