Prioritizing your money

Like other resources, money provides a measure of our priorities. How do you spend your money? Do you spend money based on what is important to you, or do you spend money based on having it? On paper, make a quick sketch of a pie chart showing how you spend your money. If you need to, do the research to see how you spent your money over the last month and the last year. Credit card and bank statements are quick and easy resources to verify your spending.

Do your purchases show that you are looking ahead and planning for recurring and potential needs, building an increasing store of savings and investments, or does your spending tell a less intentional story?

Do you have a way to prioritize funds and protect the expenses that most closely serve your purpose? Tools might include a budget, automatic transfers to named accounts, automatic bill pay, and so on.

Most people spend reactively. When you fail to look ahead and anticipate costs, you will spend a lot more money than someone who does, even if you spend it on all the same needs. It’s very difficult to take advantage of discounts, sales, and multiple bids in an emergency. The savings available goes far beyond obvious things like getting multiple bids on a roof repair: most things, from cars to clothing to food to cosmetics can be purchased at a discount by taking advantage of opportunities like sales, clearance, or unexpected rare events.¹

When you spend intentionally, you don’t just adopt the spending habits of others. You spend according to what matters most to you. You think outside the box, evaluating atypical options that free up funds from what matters less to reallocate to what matters more. For example, you move if there are less expensive living situations that satisfy what is important to you. Consider the long list of considerations! Different geographical locations have tremendous differences in cost. If you aren’t in a less expensive area, is it because it provides something more important to you than the money you would save? If you live in a more expensive domicile than alternatives, is it because you intentionally decided that what it provided was worth it to you? What other options exist? When is the last time you looked? If you have a house and a mortgage, your insurance situation can easily save you thousands per year. When was the last time you shopped around to see if you can get a better deal on your homeowner’s insurance? Do you really need the coverage you have? Would a higher deductible or even reducing to the minimal coverage required by the mortgage make sense in your situation? If your home is paid off, would it make more sense to forgo insurance and simply save/invest the money you would otherwise burn on ever-increasing premiums with no return?

Think about your healthcare situation. How essential are the doctors visits you make? How essential are the prescription drugs you take? Are there alternatives that provide greater net benefit? What health coverage, if any, do you have? What alternatives exist? Is there an option that better fits your needs and costs less?

Think about recurring monthly services and fees. What monthly services do you pay for, and are they worthwhile? For example, consider cell phone costs. Most people are on cell phone plans with companies that sell the same service on the same network under a discounted brand. Newly released cell phones offer a much higher price than older but still newly manufactured cell phones, and plans are typically loaded with expensive options like insurance and streaming services that provide questionable value for most people. Do you really need additional lines for your children? Does that provide value beyond the cost in additional money and the considerable damage research has convincingly shown it causes to their well-being?

Think about your transportation situation. Do you have a very old car that costs more to maintain than a newer car would cost? Do you have a very new car that costs more than a slightly used car would cost? Do you know the cost per mile of your car over its lifetime, and did you pick it based on that, the sticker price, or something less important? Do you have more than one vehicle, and if so, have you calculated what it costs you to operate, maintain, and insure it, and is it worth it to you? Are you confident that what you are paying for insurance is the best deal you can get? When was the last time you got multiple quotes for car insurance?

Think about your charitable giving. Who do you give money to, and why? How much of the money goes to the cause you are attempting to support? What value does it provide? Are there better opportunities that would yield greater value?

Many more examples abound. Dissect your whole financial life and rebuild it according to what you value and why you value it.