In the last post, we talked about how to make wise financial decisions. But what about decisions specifically related to your spending?
How can you learn to spend less and give, save, or invest more?
Well, there’s only one question you need to ask yourself to help you make better spending decisions and that question is…
Is what I’m about to spend money on a need or a want?
If you just stop for a few seconds to ask yourself that question every time you’re getting ready to make a purchase, no matter how large or small that purchase is, you’ll likely make better spending decisions in the long run.
Hopefully, you’ll also realize that there really are very few things you ‘need’ to spend your money on.
For example, basic food and shelter are definitely needs.
Clothing also comes to mind.
Some form of transportation is typically a need in most places across America.
Basic phone service (or cell phone service) might also be up on the list of needs since its helpful to be able to contact someone in the event of an emergency.
Spend more money on things that matter
Other than a few basics though, almost everything else we spend our money on is a want and not a need (at least in our affluent, western culture).
Now, I know what you’re thinking, “Seriously, Tyler? You’re saying I should only spend money on things I need and never spend money on things I want?”
No, not at all.
Quite the contrary, actually.
I think if you stop and ask the question above to determine whether or not an item is a need or a want before you spend your money, you may end up spending more money on wants than ever before…at least the ‘wants’ that really matter.
For example, you may decide to forgo your daily trip to Starbucks for that $4 latte and make coffee at home instead. This would give you an extra $1,000 or so a year to maybe give to your local church that’s starting a ministry to serve those less fortunate on the other side of town.
Or maybe, instead of spending several hundred dollars to buy 3-4 more pairs of shoes, you decide to take that money and invest it in a much needed weekend getaway of rest and relaxation for you and your spouse.
Or maybe, instead of spending several thousand dollars to take your family to Disney World, you decide to rent an inexpensive cabin in a nearby national park, and stick the cash you saved into your child’s college fund.
Or just maybe, you’ll ask yourself whether or not something is a need or a want and you’ll say to yourself, “This IS a want, but it’s the ‘want’ that I want to spend my money on.”
Spend less money on things that don’t
Regardless of what you end up doing, it can’t hurt to stop and think for a few seconds before you spend your hard-earned cash.
Because I’m sure the impact from your church’s ministry across town will last much longer than the good feeling you get from drinking that extra latte each day.
And I’m sure the memories of a romantic weekend getaway with your spouse will far outlast those new pairs of shoes you considered buying, but didn’t really need.
And I guarantee your child will appreciate graduating from college debt-free much more than they’ll miss out on not seeing Mickey Mouse when they were too young to remember it anyway.
Asking yourself, “Is this a need or a want?” before making a spending decision will increase the likelihood of you putting more money towards things that matter and less money towards things that don’t.
And that’s definitely something we all ‘need’ to do more of.