Every now and then, you probably go through your closets and weed out a bunch of useless stuff. Stuff that doesn’t matter to you anymore; stuff that doesn’t serve much of a purpose. It might help to do the same thing with your finances. You can reevaluate and “clean out” your budget with a few simple questions.
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Unless you’re stinking rich and can afford whatever you want, you need to spend your money wisely, and that means using it on the stuff that matters to you most. It’s important to review your budget every now and then to make sure you’re getting the most out of your spending.
Look at all of your transactions over the past couple of months. From there, finance expert Carl Richards tells you how to weed out the useless spending. Review all of your discretionary transactions and asking yourself the following:
1. Does this expense align with [your] values?
2. What value does it align with?
3. Is there a substitute that might cost less?
These questions help you understand what you’re really getting out of your spending. For example, I discovered I spend quite a bit on restaurants. These are mostly meals with friends, and the value it aligns with is spending time with those friends. It’s something that’s important to me, sure, but there are plenty of substitutes that can cost less. I could invite them over for dinner. We could go to happy hour instead. We could have a game night, whatever.
It’s not like I’m never going to go out to eat with my friends. But these questions help me understand the true value behind that expense, and then find a cheaper way to get the exact same value. It might also help to focus on the areas that matter to you most. As finance writer Tiffany Aliche puts it, spend on your loves, not likes.
All of this might be hard to do if you don’t have much discretionary spending to begin with, but it’s something to think about when you’re cleaning out your budget.
If you share a budget with your spouse or partner, you probably want to go through this together and see how your spending aligns with your shared values. Next time you’re due for a budget review, give it a try, and head to the full post for more insight.
Setting Up a Budget Based on Your Values [The New York Times]