Most personal finance articles talk about scrimping and saving. They hound you to cut your spending in creative ways you never would have thought of. Well, this isn’t that kind of article. Instead of encouraging you to stash all your money for the future, I’d like to suggest spending some of it now. Because life is for living.
First, a brief disclaimer: if you have a bad habit like gambling or binge shopping, you’re in a tough spot and certainly need to find a way to quit. However, that’s not the case for most of us, most of the time. So let’s not frame this financial discussion in terms of extremes: either casting all caution aside and indulging every whim, or squirreling away every penny. If you have a decent income and aren’t burdened with crushing debt, penny-pinching to the point where you’re robbing yourself of enjoyment is just as unhealthy as over-spending.
For most folks, a reasonable middle ground is best. Managing money may be a science, but enjoying life is an art. Spending money sensibly is about balancing the two. Here are some useful ideas for going about it.
Steer clear of “all or nothing” thinking
Let’s say you like playing video and computer games. You’re always buying new ones and re-releases of classics. Some might counsel you to delete all of them, cancel your online gaming subscriptions, and find a less expensive hobby. I beg to differ. To me, that sounds like punishment. If you genuinely enjoy playing games, do! Just make a conscious effort to buy fewer. If you purchase three games a month now, cut down to one. Or, for a real challenge, one every other month.
Perhaps you’re into magazines (online or print) and subscribe to more than you really have time to read. Okay, cancel some, but keep a few.
In my case, I love national and international news. I’m much more interested in what’s happening in Rio, Riga, or Cairo than in who stubbed his toe yesterday in the next suburb over. That’s why I dropped my local newspaper years ago: most of the stories were local. But I also maintained subscriptions to several national newsweeklies. In fact, my coffee table was so full of them, I had to put my coffee on the floor. And there was no way I could read all those magazines. So when each one came up for renewal, I let it slide. I only kept a single subscription, to a periodical from Europe. . I appreciate its British perspective and the articles about faraway places I wouldn’t otherwise hear about. Do I scour the magazine cover-to-cover each week? No. Is the subscription cheap? It’s not. But I really enjoy reading the current issue every day over lunch, and the cost is within my means.
This last point is important. Living (and spending) within your means comes down to common sense. Of course, it involves putting something away for your kids’ college tuition and your own retirement. But it also includes spending at least a little of your hard-earned cash. Even on a modest salary, you can devote a few dollars to things and activities you enjoy.
Prioritize your spending
Use your money for the things and experiences you value most. Which do you find more satisfying: getting away often, or traveling to really special destinations? If frequency is your preference, take more trips but shorter ones, and to closer, more affordable places. Think state parks, local themed attractions, and museums. On the other hand, do your kids dream nightly about going to Disneyland or Disneyworld, even though you live in New England? Try this: Next year, instead of three or four local vacations, plan a single one that’s more extravagant and memorable.
Similarly, if your passion is foreign travel, do it more often. Cut back on new clothes and shoes, drive your older car for a few more years, eat out less, and use the savings to go abroad every year.
Get the idea? There’s no one right way to enjoy your money. It all depends on your tastes and preferences.
Go for greater enjoyment—just a little less often
If you’ve got a family, you know how easy it is to overspend on meals out. Even at a reasonably-priced restaurant, a salad, entree, beverage, and dessert for four or five can put you in three-digit territory.
You and your spouse both work full-time, and you appreciate a night off from cooking family meals. But now you’re doing it three nights a week. Though it’s mostly fast food, the tab has grown to more than you can comfortably afford — for run-of-the-mill fare that’s not so appetizing or healthy, at venues that aren’t especially pleasurable to go to. So try a different approach. Take the family out less often, but to better restaurants. They don’t have to be overpriced hot spots; just a couple of steps up from fast food.
During my own childhood we didn’t have a lot of money, so meals out were few and far between. But when we did indulge, my parents made it memorable. Instead of fast food or pizza chains, we went to mid-priced but good restaurants. Family-style Italian. One-off New York delis. Chinese, which for us kids was different and exotic. None of these were excessive for our budget, but they were special for the time and place. My brother and I really looked forward to these outings. In fact, they made me think we were better off financially than we really were.
Avoid a mentality of poverty
Just about everybody knows someone who started out with very little, got rich over time, but still handles money like a poor person. In the beginning, the guy or gal needed to master the discipline of penny-pinching. But then it ended up mastering him. He’s well-off now but can’t kick the habit of financial self-denial. Though he’s achieved his dream, he won’t let himself enjoy it.
I worked for a guy like this at an after-school job during high school. His family opened a music store, built it into a chain, and became very successful. This was before PCs and cell phones, when “business data” meant writing everything down on paper. When your ballpoint ran dry, you removed the skinny metal ink cartridge, threaded the spring onto a new one, screwed the pen back together, and you were back in business.
Well, this boss of mine, whom we’ll call Jerry, didn’t even bother with pens. He just used those skinny metal refills — naked. It looked really odd and uncomfortable, and practically screamed “cheapskate.” Here was a self-made millionaire who wouldn’t even allow himself the luxury of a bona fide pen.
Some might call this thriftiness the secret of Jerry’s success. Not true. He owed his prosperity to hard work, a knack for detail, and a stroke of luck: the British pop invasion of the late 1960s. Suddenly half the kids in New York City were crazy to be in a rock band. And that’s how Jerry and his family got rich: by selling electric guitars, amps, and drum sets to teenage boys. Not by saving pennies on ballpoint pens.
The moral of the story? Don’t be a Jerry! Start with this modest first step: Next month, load a little extra onto your Green Dot card—let’s say $50—just for entertainment (a small reload fee of up to $4.95 applies. Be sure to check out their simple fees). See what it feels like to spend a little money free of guilt, and without fear of busting your budget. Who knows, you might get used to it. I did. And my financial and emotional health are just fine.
By Rob Kelman
The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation. The information provided in this blog is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.