People of all ages, not just millennials riddled with student loan debt, rent payments, and credit card bills, wrestle with spending too much. But spending too much is not the heart of the issue, it is spending too much on stuff that we don’t truly value that is the real issue. We live in a world of scarce resources, primarily our time and money, and because of this we constantly face decisions around tradeoffs. So ask yourself, does the way you spend your time and money align with what you truly value in life, or is it a reflection of other forces?
Take a Step Back to Articulate Your Values
Take a moment and ask yourself what is really, really important to you? Imagine for a second if you only had five years to live what would you do? How would you spend your time and money? Would you buy things or use your resources to create life experiences? What if you only had twelve months to live? All of these questions try to get at one central thing, what is invaluable to you? It is only in the face of true scarcity that we can begin to determine what is truly valuable to us. This clarity around what is truly important is critical to better aligning our values with how we spend our resources.
Once you begin to get really clear on what is important do your best to keep focus on these things. Write them down, post a photo of them, whatever it is just make sure they stay top of mind. This will help with the pressures of purchasing things or spending your time in ways that do not align with what is ultimately important to you. If you value travel over material things then next time you are out shopping at the mall and find a new pair of jeans you are just dying to have ask yourself – would I rather use this money to travel or purchase a new of pair of jeans?
Necessities, Valuables, and Non-Essentials
Popular financial blogger and industry expert, Carl Richards, equates our credit card statements to a personal manifesto that articulates what we value or in many cases what we perceive to value. If we say we value travel or spending time with family is our credit card or bank statement riddled with travel expenses and experiences with family or does it show purchases at Macy’s, Lululemon, and Crate & Barrel? If it is the latter, it is time to get crystal clear on what it is that we actually value and then begin to realign our values with our money.
If you are struggling with determining whether your money aligns with your values try this exercise. Print off last month’s credit card or bank statement. Grab three highlighters, preferably green, yellow and pink. Go through the list and highlight everything in yellow that is really, truly a necessity. I’m talking groceries and your heating bill, not your Venti Iced Vanilla Latte.
If there are any necessities that you are paying more for than you should or could be paying add an X next to the item. For example, you need a place to live so rent is a necessity, but a $2,500 3-bedroom condo for you and your pooch is probably not a “necessity.” Then take the pink marker and highlight everything that is a non-essential, meaning something that does not 100% align with what you value. This could be the purchase of your fourth pair of black shoes or the buy-in for that fantasy football league with coworkers you dread. Lastly, go through and highlight everything in green that aligns with your values. This differs for everybody, but it could include that dinner out with a friend you haven’t seen in years or that weekend getaway with a loved one.
Now once you’ve gone through the list and highlighted all of the items and added X’s to any necessities that you might be splurging on go back and look at what the list looks like. Do you see a list of green and yellow or is it a list full of red? Is your spending aligned with what is truly important or do your statements tell a different story?
Your spending will never be perfect and nor does it have to be. All of this isn’t to say you can never splurge on a new pair of shoes simply because they make you happy, but rather to get you to begin thinking more clearly about what it is that is actually important, and ultimately to begin better aligning your time and money, with those things that are.