I should know that living within your means does not always make you financially smart.
I proudly lived within my means the majority of my adult life. Investing initially intimidated me, but by my late twenties, I had a 401k, a ROTH IRA and was even awarded some super cool stock options at work for a job well done. Clearly, I was one financially savvy gal who knew where she was going and was making smart choices with her money.
Except I wasn’t. Far from it, in fact.
I got caught up in the belief that if you lived within your means, then everything was fine. To an extent, there is some truth to that belief. Living within or below your means is certainly better than living beyond your means. But just because you live within your means doesn’t mean that you are making good choices with your money either.
My Wake-Up Call
In 2006, I had the opportunity to transfer from Minneapolis to Los Angeles and leapt at the chance. During a team meeting, my new boss, Shannon, (yes, that one) was discussing her philosophy regarding joyful spending, and I could not stop thinking about the concept. While I didn’t have debt, I lived paycheck-to-paycheck and wasn’t spending joyfully.
I spent for the sake of spending and that was just dumb. It was time to face the music: I wasn’t as money smart as my living within my means suggested but was smart enough to know that I needed to make changes.
Figure Out What Joyful Feels Like to You
The first step was to figure out what joyful spending felt like. I used to shop out of boredom and stress and was victim to the “I work hard and deserve this” mentality. My closet was littered with clothes with their tags still attached and discarded hobbies cluttered my apartment. All of this was in my pursuit of happiness that left me with that nagging feeling that something wasn’t quite right.
It was humbling to realize that I didn’t know what genuine happiness felt like when it came to spending my money. I thought about how excited I would get when a new book by a favorite author was released. My joy was so immense that I actually had trouble sleeping the night prior and would wake up early to race out and buy the book. This was happiness. Or the shout of victory and happy dance around my living room I would do after learning something new that made my work or life easier. That was happiness. Or the contentment and peace that filled me when I snuggled next to my purring cat. Pure joy.
Now I was ready to transfer those feeling of happiness and satisfaction to my spending. This is how I did it.
Set Goals that Motivate You
Just like my living within my means wasn’t quite the financial triumph I expected, my goal-setting efforts were a bit of a disaster too. I set goals based on what I was “supposed” to do, rather than goals that I felt personally invested in achieving. Given my income, I could have easily invested more money to make my so-called goals come to fruition before scheduled, but I didn’t because they didn’t matter. Most of the time I couldn’t even remember what they were. My financial advisor had to remind me.
If you find yourself struggling to set aside the needed money for your goals, then it’s time to reassess them. See if you made the same mistake as me, then reset goals that motivate you. Don’t worry about whether they impress anyone else or compare your goals against theirs. It isn’t a competition. The only thing that should be equal is your enthusiasm and passion for achieving your goals. Once you set goals that motivate you, it should no longer feel like you’re being punished when you put money towards your goals or choose to honor them over a new outfit or smartphone.
Track Your Spending
This was my biggest wake-up call! For years, I spent mindlessly within my means, with thousands of dollars spent and nothing gained. Even worse, I had no idea I was making this mistake because I wasn’t tracking my spending.
I believe everyone needs to track their spending to make sure they really are spending their money wisely, even if they live within their means. You may not need to do this all the time, but definitely review your spending a couple times a year. We all make those purchases, a bottle of Diet Coke, a magazine or meal out, that we forget about 90 seconds later because they didn’t seem like a big deal in the moment. By doing this exercise, I discovered that I spent about $800 a month dining out. Yikes!
Whether you use a pen and notepad like I did or some fancy app for your smartphone, track all of your spending without judgement. In other words, if you normally buy a grande Caramel Macchiato every morning, don’t stop because you’re now tracking your spending and want to be on your best behavior. You want an unbiased look at where your money goes, so you can identify patterns and trends to help ensure you’re truly spending your money as you intend.
Living Within My Means Combined with Joyful Spending is Financially Savvy
My former days of living under the false belief that living within my means made me financially savvy are long gone. I know better. Living within your means is a good start, but if you’re not spending your money on things that truly bring you joy, then you’re missing out on the good life. I know I was.
What was your biggest surprise when you started tracking your spending?
About the author: Tanya is a freelance writer and web designer. She spent eight years in the financial services industry where she witnessed the good, bad and ugly side of money, including her own. She blogs at Eat Laugh Purr where she enjoys simple pleasures every day.
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