One of the best things you can do, as a savvy money manager, is to pinpoint your spending preferences. This isn’t just about declaring yourself a “saver” or a “spender.” It’s about looking at what you spend your money on, and adjusting your habits so that you spend on the things that are most important to you.
What’s Important to You?
Your first step is figuring out what is important to you. What do you like to do? When you spend money, how do feel, depending on what you spend it on.
For example, you might feel buyer’s remorse after spending money on a TV that you just don’t watch that much. On the other hand, you might neve feel bad about spending money on a good dinner at a nice restaurant. Think about what you really enjoy spending your money on. These are the spending priorities you should have. Think about your philosophies of life and money, and you’ll begin to get an idea of what your spending preferences are.
Things vs. Experience
One of the first things you should do is determine whether you like things or experiences more. Many people buy a bunch of stuff, only to be disappointed that it grows stale after awhile. Others go on trips, only to lament how much it cost them for a relatively short period of time for a bit of a joyride.
What do you like better? Would you rather be surrounded by the latest gadgets? Or do you want experience new and interesting things? It comes down to a specific mindset, and what gives you pleasure. There is no right or wrong answer. But if you decide that you like experiences better, you need to bring your spending in line with that. Buy fewer things, and spend your money on experiences that you enjoy.
Money: Means to an End? Or the End Itself?
Another consideration is how you view money, and its purposes. Do you view money as a means to an end? For many people, the point of having money is to enjoy what you want. You try to earn more money because you need it to pay for the necessities of life, and because there are some things that are more enjoyable when you can spend money on them.
On the other hand, others link money to status. Rather than spend money, the preference is to save it up. This is because money can actually be the end itself. The more money you have, the more successful you feel. Your philosophy about what money is for — whether it’s for spending, or for hoarding as a way to keep score — influences how you spend your money, as well as how you feel about spending your money.
Security vs. Spontaneity
Don’t forget to consider whether or not you are interested in security. You can spend money to build an emergency fund, or to save for a rainy day. The idea behind spending money on security is making sure that you are set later on in life. This might mean that you have a different goal if you are more interested in spontaneity. If you aren’t as worried about the future, you might make smaller retirement account contributions, and spend more of your money on “fun” things, your spending preference is clear.
Balance Your Spending
In many cases, it’s really a matter of balance. Take a look at your spending, and consider the way you use your money. Think about how you feel when you spend on certain things, and what makes you happy (or unhappy) about your situation. Chances are that you need a little more balance. While it’s fun to spend money on the things that you like, you also need to prepare for the future. You might want to spend on experiences, but there are also things that you need in order to survive as a member of society.
Look for ways to balance out your spending. Consider needs and true wants. Figure out which things will make you happy beyond just survival. When you know what these items are, you can resolve to improve your finances by making smarter spending choices. Instead of spending on things that you think you “should” buy, or experiences you are “supposed” to have, look at your own life, and what you want to accomplish.
Then, create a spending plan that works according to your preferences.
