What I spend money on.
I think there is a misconception that as a financial planner, my advice is always to spend less money. Yes, there is HUGE power over the long-run in spending a little less and saving a little more (there is research that shows that your savings rate is far more important than your rate of return in achieving financial freedom), but my message is really not to spend less per se. My message is that you have to know who you are, know what is important to you and spend in line with your values. Sounds simple, but in practice of course it's a lot harder. The key thing that makes it hard is human nature's tendency to want to keep up with the people around us. My husband and I spend a lot of time thinking about what we value as a family and ensuring that, as our earnings increase over the years, we keep our spending in check. I once read a blog post by Carl Richards in which he asked his readers to imagine that a cultural anthropologist finds your credit card statements in 100 years. What would that person conclude about you, how you live your life, and what you value? I find that a powerful thought.
Here is my list of the things that I value and spend money on, and the things that I don't. But remember, we all have different lives and different priorities. The key is that you know what yourvalues are.
Things I feel it's worth spending money on:
- Health and fitness: we only have one body and I have no fear of getting old because I look after my body. Each week I spend money on two personal training sessions with Tarasa at CrossFit. I love her, and love my workouts. I also go to Virginia's classes once a week which are different and equally challenging! I also am happy to spend money on good, wholesome, nutritious food. We eat more organic food that we used to and I try and buy high-quality and high-welfare meat.
- Eating out: although we don't eat in Michelin starred restaurants, we do, as a family, enjoy eating out. I work hard and love being able to take time at the weekend to have a meal prepared for me where I don't have to clear up! To me, it's money well spent.
- Good mattress: we recently bought an expensive memory foam mattress. We haven't regretted it for a minute. We spend around one-third of our life on it.
- Creating a family home: whilst we don't live in a big house (by Cayman standards) and we live in a modest neighborhood, I am a home-body and love to create a warm and welcoming home for us and our family when they come to visit. I love spending money on little things around the house. Most recently I did some wallpapering in our guest room and renovated my daughter's room.
- Books: I have developed a slight book buying addiction recently and can't be swayed by reading them on the kindle. I have to be able to hold it, turn the corners down and write in it. And really, when you think about it, books are amazing value. Think about all the things you learn from reading hundreds of pages of someone else's thoughts.
- Kids activities: I am very conscious not to overschedule our kids lives as I believe that children need plenty of time 'just to be'. But I am happy to pay up for them to learn and experience new things. I particularly encourage sport and music.
Things where our family have exercised restraint:
- New cars: we have only purchased second hand cars for cash, because neither of us are car nuts, and I can't see the point of driving a new car out of the garage and see it depreciate by 30% on day one. My current car is a ten year old mini convertible that we imported from Japan.
- Expensive wine: I love wine. But I have no ability to tell the difference between a $15 bottle and a $50 bottle. So we drink $15 wine. And we drink it very happily.
- Travel: I have never sat in the front of the plane (aside from on domestic US flights). I would love to, but we cannot justify flying our family business or first until our mortgage is fully paid off and we feel 100% sure that our retirement plan is secure. And even then, I'm not sure it's something we will regularly spend money on. Maybe on special occasions.
- Holidays: family time together is one of my key values, but we have found great ways of keeping the costs down. We are regular house swappers - we get free accommodation in beautiful homes and cars included. This last summer we went camping. For us, holidays don't have to involve five star hotels in order to be special.
- Designer clothes, bags, shoes and jewelry: I do think it's worth having a few key pieces but I generally don't buy expensive clothes. Having said that, I have upgraded slightly over the past few years from cheap high street brands (Mango, Zara) to more mid-range. I have the grand total of two handbags (one definitely needs replacing) and my shoes are high street brands. I love my costume jewelry but again, it's all high street brand stuff. I own one diamond and it's in my engagement ring.
So, that's me. What is it for you? What's in your list?
If you're not sure, have a look at your spending. Download your statements into Excel and look at each line. Ask yourself, does this expense align with my values? If not, what value does it align with? Once you get clear on it you can start substituting or eliminating spending that doesn't align with your values. I promise you, as you start on and move through this process you will feel happier, lighter, more fulfilled, less stressed and you will almost certainly have more money in your bank account. Drop me a line and let me know how you get on.