The key to saving, as everyone knows, is to spend less than you earn. So simple! But how do you get your spending under control when there are countless things you can spend money on?
Over on The Simple Dollar, Trent Hamm offers this philosophy on spending and saving: “Be super cheap on everything that doesn’t matter to you while spending responsibly on the things that do matter to you.”
But how exactly do you figure out what’s important to you? Books, trips, luxury goods, toilet paper — how do you decide which things in your life are worth shelling out a little bit more money on?
Some things are obvious, even if they’re not the “normal” things society/personal finance sites tell you are OK to splurge on. Like Hamm, you might not be much of a foodie, so spending on meals does nothing for you.
On the other hand, you might derive a lot of joy from certain fresh or more expensive ingredients or restaurants.
Similarly, if looking your best is important to you, then spending on shampoo/conditioner that works for you, makeup that doesn’t cause break outs and quality lotion might be worth it. If that’s what you value, it’s not superfluous, though every personal finance site might tell you otherwise.
So, how do you decide what you don’t mind scrimping on? Hamm has a few suggestions, but the one that resonates most deeply is that you can be flexible with yourself.
You don’t have to decide right now what you will and will not spend on and then stick to it — you can experiment with different spending schemes and find the right balance.
To do so, you can perform a spending audit. Hamm writes:
Sit down with your monthly credit card statements and your debit card statement. Go through each and every line item on those statements and ask yourself a simple question: “Was this expense actually worthwhile?”
If you can’t answer an immediate strong “yes” and are able to explain why, then you should strongly consider cutting out that expense going forward.
If you do this every month, you will discover patterns in your spending that you can then work to cut out. “I might notice that I had a bunch of little expenses when I went to visit family members, all of them forgettable,” writes Hamm. “Why didn’t I just pack a bag of food to take with me and save about 75 per cent of that expense?”
I’ll give you a recent example from my own life: I love raspberries, but have always considered them a luxury, as they can run from $5 per container in New York.
Recently, though, I realised that it’s not that much of an expense if I’m buying two or three containers a week, considering the potential junk food they replace in my diet (one of those head-scratching line items that Hamm wrote about) and the happiness they elicit.
Yes, they’re pricey-ish, but they add more value to my life than they take away. Other people — yes, I’m sure many of our commenters — will consider it an unnecessary purchase, but to me the raspberries are well worth the cost.
OK, raspberries are an approved expense, but what about that junk food? I can cut that out, and then come back next month and see if I truly missed it (probably not). Still, as Hamm writes, “Usually, I find that if I’ve cut too hard and I regret something, it’s because that cutback did damage to something else that I value.
Maybe I did something that hurt a friendship, or maybe I actually infringed on some hobby or area of life that really matters to me and it wasn’t obvious at first glance.”
When you realise that you’ve cut too much, you can then think about what value you’re missing from your life and add it back in.
“Reflecting on a bad spending choice until I really understand why it is bad usually alters my spending habits in a good way, so that going forward there are fewer and fewer spending mistakes when I operate on instinct,” Hamm writes.
So, instead of spending on things that you don’t actually value, you can save your money for what you do value, whether that’s high-quality shampoo, raspberries or a bit more in your savings account. Enjoy your money.