Tag: Spending Choices

You Need Not Spend It All – Leftover Money

The third wave of personal finance is about living your best life. New books and blogs are coming out that encourage people to figure out how they want to spend their time once they have achieved financial independence. The personal finance realm is no longer solely about working super-hard for a fixed number of years in order to retire as soon as possible. This new era is focused on determining how you want to live your life once your time is your own.

Recently, a new perspective has emerged. It’s about spending your money, all of it, in order to live your best life. There’s a book called Die With Zero that encourages people to spend all their money before they shuffle off the collective mortal coil. I’ve read the book. I’ve thought about the book. My conclusion is that it’s not for me.

I fully expect that this blog post will appeal to a very slim margin of people who read it. And that’s fine. I’m okay with the fact that I’m not everyone’s cup of tea. I’m sharing my thoughts because I can’t be the only one who believes that you need not spend it all to be happy.

Am I an advocate of saving every nickel? Squirreling away every dime for an uncertain future? Hoarding currency with the sole goal of acquiring “more”?

The answer is “No”. Life is meant to be enjoyed. So many people don’t have any option other than living paycheque-to-paycheque, or by depending on charity. Not everyone has the disposable income to live life the way they would prefer. However, there are many others who do have the funds to craft the life that they truly desire. I’ve always encouraged those people to prioritize their spending in a fashion that allows them to achieve their heart’s desire and fulfill their lifelong dreams. We each only get one life, so we should do what we can to make that life as good as it can possibly be.

My position is that I don’t believe that spending all of your money is always necessary. Let’s say you’re fortunate enough to earn enough money to pay for all your needs, you’ve paid off your debts, and you can easily purchase all of your wants too. After you’re done paying for that, you’ve still got money leftover at the end of the month.

Leftover Money

Do you really need to spend the leftover money in order to acquire more happiness & joy? After all, you’re already acquiring everything you need and want. Your creditors are distant memories. You’re already living the life you want. Will spending even more money bring your more joy and happiness?

What are you supposed to do with the “leftover” money? According to DWZ, you’re supposed to just spend it on something. The premise of the book is that dying with leftover money means that you did not maximize your joy when you were alive.

That’s where I take issue with the book. In my view, you shouldn’t spend your money simply because you can. That’s wasteful. I’m also not convinced that spending money just because it’s there will bring you any greater amount of joy. There are many awesome and incredible experiences in the world. You should only pursue those that appeal to you, and you’re already smart enough to figure out what those are. Once you’ve done everything you want to do, then I’m certainly not going to tell you how to spend your remaining money.

If you’re already spending your money = on everything that you need and want, and you’re out of debt, then why do you need to spend more? Once you’ve reached the very desirable goal of living your life as you wish, then what will you achieve by spending more?

Money buys options. Of this, there is no doubt. With money, you can pay for your food, shelter, clothing, transportation, communication, entertainment, medical care, travel and various other miscellaneous things. There is no doubt that having money can make your life much, much easier. Yet, I’m still not convinced that spending money when you don’t particularly want to is a good thing.

You’re allowed to keep it.

One of the lesser-discussed aspects of money is that you don’t have to spend it. It’s true. You can have it and just keep it wherever you want – in a savings account, an investment portfolio, or in your sock drawer. Allow me to repeat it more loudly for the people at the back. You don’t have to spend your money if you don’t want to!

This is where I take issue with DWZ’s premise. I don’t think that people need to spend every penny before they die in order to have lived a great life. Once you’re out of debt, and you can spend freely on both your needs and your wants, then anything that’s leftover shouldn’t be viewed as a problem to be solved. Your fortunate financial position will still have allowed you to spend money during your lifetime pursuing your dreams and having the life you wanted. So what if there’s some money leftover?

Bottom line is this. You need not spend it all. You shouldn’t be pressured into spending money if you’re already living your dream life. It’s okay to not spend even if you have the money to do so. Live your best life and spend your money doing so in the way that makes you happiest. If you decide to increase your spending, that’s fine. And if you decide not to increase your spending, that’s fine too. The ultimate decision lies with you.

Is Your Spending Making You Happy?

There are lots of ways to find happiness. Playing with puppies. Mastering a difficult musical piece. Finally accomplishing a goal that means a lot to you personally. However, I like to talk about money in this space so I’m asking you to consider whether your spending is making you happy.

For the record, I want it said that I don’t believe that spending is the path to happiness. No, no, no… not at all! That way leads to madness. As Dr. Seuss has taught us every Christmas, happiness is not bought at the store.

What I’m suggesting is that since you work so hard for your money, you should only spend it on things that will generate happiness for you. That could be buying an experience that means something special to you. It could be donating money to a cause that you believe in very deeply. Maybe you want to gift something special to someone else, or create a celebration in honor of someone you love very much. True, these things all need to be purchased but they’re not the same quality of purchase as a consumer good that will likely just take up space. Will buying another pair of jeans bring you the same amount of happiness as paying the vet-bill to get your fur-baby the care that she or he needs to be healthy again?

Every penny should be driving your happiness quotient up. If your purchases aren’t doing that for you, then I have to ask you to consider why you’re making that purchase.

Novelty is part of the Happiness Quotient

Every fall, various coffee companies release their version of a pumpkin chai latte. I know that this is a seasonal drink. I also know that a great many people look forward to this time of year. (I’m not one of them, but to each their own.) I can only assume that lovers of the pumpkin chai latte are very happy to have the first one of the season. If they weren’t, they wouldn’t readily spend money on them as soon as the drink became available. However, I’m not as easily persuaded that they are as happy with subsequent pumpkin chai latte’s as they are with the first one.

Once the novelty wears off, is the burst of happiness at their seasonal arrival remain as intense on the last day as it was on the first day?

Personally, I think the novelty factor is one of the reasons why experiences bring more happiness than stuff. Attending a concert with friends – traveling – enjoying a great meal! Think about your most cherished memories where you had to open your wallet for whatever reason. Would you gladly pay the money again?

Of course, great experiences can also be had for free. However, I’m talking about the experiences that might have cost you a little bit of money. Unlike stuff that can disappear into the back of a closet, a storage locker, or the garage, we remember our experiences. They’re special because they are unique to us. They have a personal novelty that is unlikely to be purchased from a retail outlet. The ones we cherish most have that 7-star rating, which will last with us for a very long time. They’re not that seventh pair of jeans that we bought from our favorite store.

Maximize your Happiness Quotient

Since people have to trade their energy and time to acquire money, it seems to me that maximizing happiness from every purchase just makes sense. I’d like to suggest that one of your goals for 2022 is to only spend money if it will make you happy. You should aim to only make 5-star, or higher, purchases at every opportunity. If you don’t feel that the 17th pumpkin chai latte is going to make you happy, then don’t buy it. The beauty of the PCL-season is that it is coming back next year.

To be clear, I’m not talking about spending on survival expenses. Food, shelter, transportation all need to be acquired. Maybe you feel happiness that you have the money to pay for your survival expenses. If so, great! Generally speaking, I’m talking about the joy generated by your disposable income, the money that’s leftover after you’ve taken care of the absolute necessities. Do you feel happiness when you spend that money?

Start by tracking your expenditures, then rate how much happiness they generated for you. One-star for “Not happy at all”. Seven-stars for “Happier than I could’ve ever dreamed!” In my humble opinion, you should only spend money if the purchase will hit atleast 5-stars on this rating scale. Anything less is a waste of your money.

Now, I ask you. If your purchases aren’t making you happy, then why are you making them? Is it just habit? Do you spend to make someone else happy? Have you subconsciously bought into the marketers’ false promise that spending money is the same thing as acquiring happiness?

Sit with yourself for a bit. Figure out if your spending choices are worthy of 5-stars or more. If the answer is “No”, then I want you to think about why that is. Each day, you’re presented with so many opportunities to spend your money. Try this experiment. Before you open your wallet, ask yourself if the purchase is going to make you happy. Articulate what it is that you think the purchase will accomplish – create a forever-memory with a loved one? Fulfill some long-held heart’s desire? Put a smile on someone’s face?

Aim to have the rating last a long time.

This past summer, the gaggle of teenagers who lived next door moved away. I miss them. They were all good kids – friendly, responsible, polite. Also, they would shovel my driveway & sidewalk for money. They were the perfect young neighbours! Mid-November of last year, I went to one of my favourite stores and bought a snow-blower. Believe me when I tell that the purchase of a snow blower rated 6-stars on my happiness scale!

On a good day, my driveway will only take 45 minutes to shovel. Then add on another 10 minutes to do the sidewalk at the front of my house. My snow-blower has cut the total time down to 25 minutes… When I finally get the 100’ extension cord I need, I expect that it will take even less time to do this chore since I won’t have to do the sidewalk with the shovel. My driveway is longer than 50’ so I’m still using a shovel for the last 10’ and the sidewalks.

My snow blower makes me happy because it saves me time on a chore that I really dislike. When it’s -30C outside, yet I still need to clear my driveway, that machine moves snow way faster than I can with a shovel. I also don’t have to worry that I’m re-injuring my wrist or my shoulder. And I’m also making the walking surfaces around my house safer for everyone. The snow-blower has continued to maintain its 6-star rating!

You’re going to be spending money in 2022. You might as well be increasing your happiness quotient while you do so. Make this year the one where you strive to only spend your money in ways that only bring more happiness into your life.

Priorities

Based on my own experience and decades of observation, I am convinced without a shadow of a doubt that priorities guide how we spend money. To paraphrase Paula Pant at www.affordanything.com, every spending decision you make is based on priorities because choosing to spend on one thing means that you’re not spending on something else. I think a lot of personal finance problems could be solved if people created their own priorities, but they don’t. Many people allow others to set their priorities for them, whether through marketing or peer pressure or societal expectations. People adopt the priorities of others and spend their money accordingly. Sometimes, this method works for them and sometimes it doesn’t.

Ideally, you create your own set of priorities and you’re in a position to pursue them with the support of your friends and family. I haven’t always been so lucky.

After I finished university and started my first professional job, my closest friends would give me a hard time about how I chose to spend my money. In short, they didn’t like the fact that I didn’t spend money on things that didn’t matter to me. They felt entitled to tell me that I “could afford it” – whatever “it” happened to be at the time. I heard their message loud and clear: my spending choices weren’t the “right” ones in their eyes. At the time, I had student loan debt. I had car debt. I owed money on my mortgage. I chose to allot my paycheque to various spending categories and I was very rigorous about paying down my debt while starting to save for my retirement. These were my priorities, and my closest friends at the time didn’t share or respect them.

Only one friend understood my priorities and supported me wholeheartedly. The vast majority of my closest friends did not. They were definitely more spend-y than I was but I couldn’t let their spending choices derail mine. What was my solution? Well, I didn’t get rid of those friends and I still spend time with them today. Over time, I simply stopped talking to them about my priorities and my money. In essence, I cut them out of the financial part of my life because I didn’t trust them to respect my personal goals and dreams. My goals were to establish a habit of saving for retirement, to pay off my student loans, to pay off my car loan, and to pay off my mortgage as fast as humanly possible. I only had so much money to work with and I wasn’t going to let their opinion that I “could afford it” derail me from focusing on my priorities. I was the only person who knew what my goals were and how I wanted to spend my money to achieve them.

Over the years, I read personal finance books and discovered the world of personal financial bloggers. It was in the books and the blogs that I found a niche where my priorities were the norm, where my goals were supported, and where strategies to achieve my hopes and dreams were shared by people who had already achieved similar hopes and dreams. As a result of what I learned from the books and the blogs, I was completely debt-free by age 34 and had achieved a solid six-figure net worth. By the time I was 40, I’d entered the double-comma club.

I also strengthened my relationship with that one friend who’d totally understood my desire to get out of debt and to pay cash for everything. We talked about money and shared what we learned. I remember when she confided to me that she and her husband would put off any and all purchases to the last possible moment in order to focus on paying off their mortgage. I was as excited as she was when they hit that milestone, just as she had been thrilled for me when I became debt-free at age 34.

It took me many years to craft a money system that funds my priorities with minimal decision-making on my part. Right now, I use automatic transfers to ensure that a portion of each paycheque is allocated towards each of my priorities.

– Retirement accounts? Check.

– Investment portfolio? Check.

– Emergency fund? Check.

– Utilities, property taxes, insurance premiums? Check

– Charitable donations? Check.

– Day to day spending? Check.

– Saving for next vehicle? Check.

– Saving for travel? Check.

– Saving for home renovations? Check.

These are the priorities that I have defined for myself and I have honed them over the years. I’ve learned to put very little weight on the priorities that others try to set for me. Their priorities won’t make me happy, but they will drain my wallet and get me into debt. I don’t want that for myself so I stick to what I know will get me closer to the life I want to live.

Over the years, there have been many times when I’ve had to re-order my priorities to ensure that I was doing what I really and truly wanted. Even today, I’m debating with myself about whether travel is more important than home maintenance.

I love travel, but I also need to renovate my basement bathroom and laundry room. These rooms aren’t in complete disrepair, but they will be if I don’t do something in the next 3 years. However, I realize that if I want to see, taste, touch as much of the world as possible then I have to get out there and do it. These priorities are both important to me right now and I see them in my mind’s eye as the two ends of a pendulum. I’ve been trying to figure out how to pay for both in 2019 and it’s just not going to happen unless I win the lottery or discover that a wildly-benevolent stranger has left me a sizeable bequest. I have to pick one priority over the other. In other words, one of the two is going to take a higher priority for me in 2019. I will still accomplish both goals, just not at the same time. I only have so much money and I refuse to go into debt, so something has to wait until I have the cash on hand to make the purchase. Right now, the pendulum is swinging towards the home renovation…but there’s a very good chance that it could swing back towards travel. All I am certain of right now is that one of my two priorities will be satisfied with the cash that I save up in the next year or so.

I’m not perfect, but I am definitely older and wiser now. I have to bite my tongue until it bleeds when I see others making what I view as “bad decisions” with their money. I remind myself that they’re spending their money in line with their personal priorities and that they’re under absolutely no obligation to have the same priorities that I do. Until they ask me what I think of their choices, I keep my opinions to myself. I do not want to do to my friends what was done to me because I didn’t like the feeling of knowing that I didn’t have their support. I don’t have to agree with my friends’ priorities and spending choices, but I do have to respect them.

The world isn’t ideal and you can’t always count on others to support your hopes and dreams. All you can do is figure out what you really want and go get it.