SPENDING YOUR MONEY ON PURPOSE

WHAT DO I MEAN BY SPENDING YOUR MONEY ON PURPOSE?

The reason I gave this episode the title of spending your money on purpose is because I think that often people think of a frugal lifestyle of one where we hoard our money or live very cheaply. The purpose of frugal living is not to live a life of sacrifice and be cheap about everything we do. It’s about looking at the resources we have and being deliberate about what we do with them. It’s making choices that are in alignment with what you value most. You make decisions with your goals and what you want out of life in mind. It takes work to be intentional and make sure that your money goes where you want it to go.

Being frugal isn’t about not spending money, but it’s about spending your money on purpose. Knowing where your money is going and getting the most out of it. While we all have a limit to how much money we have available to us, we will always get more out of our money when we pay attention to what we are doing with it.

THINK ABOUT YOUR VALUES

What is it that you really value? Some examples of things you may want to focus on are family, education, a healthy lifestyle, community, or travel. Not all of our values will require that money be spent to focus on them. For example, spending time with family doesn’t cost anything, unless spending time with family requires travel. Look at what matters most to you and think about what types of expenses may be involved in that part of your life.

What can you do to make sure that you are spending your money in ways that are in line with your values? Look at what you are spending money on and see if you can cut back elsewhere. You might find that you are spending money on things that are less of a priority to you. Of course, there are certain things that we must spend money on, but there are usually some areas we can cut back on to allow a little extra funds to go towards what is most important to us.

BE CLEAR ON WANTS VERSUS NEEDS

There is nothing wrong with spending money on “wants”. But sometimes we spend impulsively when we see something we suddenly want that we never really wanted before that moment. If you are trying to save money for something that is important to you, it will be necessary to give up some of those extra “wants” and just spend money on the things you actually need in order to get the things that you truly want to have. When you are purchasing something that is a want versus a need consider what you are giving up. Whenever you spend money on something, that means you no longer have that to spend on something else.

When you are spending your money on purpose, you take time to consider what you are giving up by making a purchase. It does not mean that you do not purchase things just for enjoyment. It means that you are thoughtful about your purchases.

SET GOALS

Having specific goals in mind helps you prioritize your spending. Take the time to think about what your financial goals currently are. If you have already identified your goals, maybe take a little time to review them again. Keeping your goals fresh in your mind can help you make better choices when it comes to spending your money. It’s best to focus on a smaller number of goals at any time. When you are trying to achieve too many things at once you often lose motivation because no one thing can really gain that much traction. Seeing progress on your financial goals can help keep you motivated to make intentional spending choices.

PUT THOUGHT INTO YOUR PURCHASES

Buying something because it will add value to your life that you have a budget for feels so much better than buying something on a whim with no budget to cover the cost. Many financial experts suggest giving yourself some time to think it over (at least a day) before making a purchase. This allows you to decide if the purchase is in line with your financial goals and covered by your budget. Often you will find the next day, you don’t even want the item anymore. I regularly put things in an Amazon cart and “save for later”.  More times than not, I end up forgetting about them.  Had I just clicked “buy now” I would have spent money on something that I could definitely live without, and clearly wouldn’t really miss.

TRACK YOUR EXPENSES

What I have found the most helpful in making sure I know where my money goes and that I am OK with it is to track my expenses. We often think we know where our money until we actually start tracking it. It’s hard to believe how much those $5 and $10 purchases here and there add up over the course of a month. By tracking expenses we can get a much better picture of where we might be able to cut back a little bit to reallocate money in another way. Even if you are against tracking expenses, give it a try for at least a period of time. You might be surprised by what you are spending your money on.

USE SINKING FUNDS TO SAVE FOR IRREGULAR EXPENSES

Sinking funds are just a way to save up each week or month for things that occur at irregular times during the year. By putting a little bit away over the course of time, when the expense comes up you are prepared to cover the cost. Do you take your pets the vet for an annual visit that costs several hundred dollars? Maybe you have an annual renewal for a warehouse membership? Or you know that you will need some money to buy gifts for people over the course of the year? If so, you might want to set up a sinking fund where you would put away a portion of the cost each week.

There are so many examples of expenses that occur at irregular times throughout the year. By putting a little money aside on a regular basis for these costs you don’t end up coming in over budget when they happen because you already spent the money on other things. I have many sinking funds at this point, but started with only a few. Each time I got hit with one of those expenses that I forgot was coming, I would set up a new sinking fund so that I would be prepared next time!

SAVE UP FOR THINGS WHEN YOU CAN

Maybe you decided you would like to take your family out to dinner once in a while but it’s not in your budget. Try saving up a little bit each week until you have the money saved up. You can do $5 or $10 a week.  Whatever you can find in your budget. Sometimes we end up with a little extra cash for whatever reason. However, you might end up with a little extra cash, by having things that you are working on saving up for helps you put that money to a purpose that means something to you. It is such a different feeling spending money on something that you specifically saved up for. Some things I like to save up for if there are a few extra dollars in the budget are a pizza night, trader joes trip, or just something fun for the family to do.

IT TAKES TIME AND PRACTICE TO DEVELOP THESE HABITS

Depending on where you are at currently it can sound a bit overwhelming to put all of this thought into where your money goes. Start small.  Pick one thing to focus on and start there. If you are not already tracking your expenses, maybe start there. Getting a good understanding of where your money is currently going is always helpful. It’s a great start to begin being more intentional with your money. No matter where you are financially, you will always be better off when you pay attention to where your money is going and spend it on purpose.

Thanks so much for checking in! If you would like to hear the podcast version of this topic check out Lola’s Frugal Life Podcast! Also, be sure to check out my other blog posts on this site!

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