Monday Night Finance- Volume 67

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Values-Based Budgeting: Spending Your Money On What You Love

Do you have a budget? If so, how did you set your budget categories? Did you use a formula like the 50:30:20 rule? Or perhaps you created your budget based upon a book or blog you read with an example budget and then copied it for yourself. No matter when you created your budget, when was the last time you looked at your budget. Not just tracked your spending in the various categories, but looked at the entire budget structure and asked if it was really serving you and what you wanted to get out of life. If you are on budget autopilot, Kevin from Family Money Adventures wants you to consider values based budgeting. (And if you don’t have a budget, CountAbout is a great tool to help you build one!)

All of us have certain things that we absolutely love. Things that bring us joy, whether a big or small expense. Travel. Your kids. New experiences. A good cup of coffee. Self-care. Dining out. Technology. Music. Financial freedom. Entertainment. Whatever it is, a values-based budget prioritizes spending in these “loved” categories while aiming to aggressively cut out spending in other areas. ~ Family Money Adventure

On its most fundamental level, values based budgeting makes sense; spend more on what you love and cut spending on things you don’t. But if you’ve never given your values or your budget much thought, you might find that you are spending money on things that don’t make you happy. If you are interested in values based budgeting and want to give it a try but aren’t sure where to start, you can start by listing your values. Are you someone that enjoys traveling? Do you feel strongly in supporting charities that help a certain population? In this first step, you don’t need to assign dollar amounts to each category, instead you should just focus on finding what it important to you. (And just importantly, what is not important to you so you can spend less money on it.) If you’re interested and want more details about building your own values based budget, check out the article.

Is Spending On Experience Overrated?

We’ve all heard the advice- if you want to be happy, you should spend your money on experiences rather than objects. Apparently, researchers have found that when we buy a new object, we get excited about owning it for a short while. However, over time you eventually become used to owning that object and it doesn’t bring you happiness anymore. For example, maybe you really want to own a red sports car. But once you finally buy the red sports car, it just becomes your way to get to work. Eventually, you need to pay for maintenance on the car and you’re not any happier than you were with your old car. In contrast, researchers have found that spending money on experiences can create special memories that can bring you happiness for many years. In this article Joe from Retire by 40 questions this wisdom about spending on experiences.

Personally, I don’t think back on previous trips often. Is experience really a better buy if you don’t think about it much? ~Retire by 40

To illustrate this, Joe compares two of his previous discretionary purchases: an entertainment system consisting of a big screen TV and an X-box and a big trip to Costa Rica. Joe watches his television nearly every day. And while Joe doesn’t play as many video games as he used to, his son loves the X-box. He contends that he really got his money’s worth from these purchases and that they were a great investment. In contrast, while he enjoyed his trip to Costa Rica, he hardly ever thinks of it. If given the choice between the two, Joe contends that he’d rather have the TV and X-box than the trip. The moral of the story is that spending on experiences isn’t always good and that spending money on objects isn’t always bad. It’s important to know what brings you happiness and adjust your spending appropriately.

Here’s Why The Middle Class Hardly Builds Financial Empire

What separates the middle class from the wealthy? More importantly, how can someone move from being middle class to being wealthy? Many middle class people earn a healthy salary and have an opportunity to build wealth. But are they taking full advantage of it? In this article by Paulo Jose, he examines why the rich get richer why many middle class people struggle to get by.

Society wants you to do something stupid with your money. Say no. ~The Making of a Millionaire

Paulo notes that modern society encourages you to waste your money. We are constantly bombarded for advertisements promising happiness if we just buy their goods. Furthermore, many items are now being marketed in a cycle of planned obsolescence. Who wants an iPhone 6 when the iPhone 13 has so many more features? If you’re always chasing the next gadget or the latest model, you’re going to have less money to build wealth (and the freedom that goes along with it). Another example of something that destroys both your wealth and the planet is fast fashion. Buying a higher quality item one time can help you save money over the long term. If you are serious about building wealth, check out this article for more ideas about how you may be sabotaging your goals.