What should you know?
The saying goes “money is like a bar of soap, the more you touch it, the less you have”.
There is nothing at all wrong with spending your money, you worked hard for it so you deserve to enjoy the freedom it brings you. What matters is how you spend it.
It is important to understand that your money is finite and can only be spent once. There is an opportunity cost, if you spend it today, it won’t be there tomorrow.
What you need now: These are your essential needs today, the cost of running your home, schooling, food, clothes, and any other costs that are required for you to live your basic lifestyle.
What you need in the future: The things you will need in the future to preserve your basic lifestyle.
What you truly value now: This is anything that is ‘non-essential’ but is important and enjoyable for you and your family. The list is endless and personal to you and includes holidays, experiences, sporting activities, eating out, and anything else that you truly value in your lifestyle.
What you will truly value in the future: These are the things you want to be able to have and do in the future to live an enjoyable life.
Things you want but you don’t need or value: This requires an honest reflection on your spending. These are all the things you spend your money on that don’t make any meaningful difference to your life.
Why should you care?
As you earn more, you tend to spend more. This is known as ‘Lifestyle Creep’ and without intentional thought, it can easily run out of control.
Taking the time to figure out your priorities and to understand what you truly enjoy and value, both now and in the future, will give structure and meaning to your spending.
Once you have worked out (honestly) what is important to you, and what isn’t, you can channel your money towards the right things and ignore the rest.
