• The Money Spending Trap

     

    Have you ever noticed the obvious contradictions in experts’ money and abundance advice? Some tell you to save money above all else, others insist that in order to be abundant, you need to live as though you already had material wealth, and treat yourself to luxuries.

    When I embarked on my journey to learn about finances and change my money mindset, I often ended up tearing my hair trying to figure out which strategy to use. Remembering how confusing I found it all, was one of the reasons I decided to create my new “Wild and (Financially) Free” program which will be launched next month.

    I thought I’d give you a bit of a sneak peak into the contents of the program.

     

    Save or “be abundant”?

    As usual, it’s not a question of either/or. Instead, you need to go a little deeper and differenciate. Here are a few points to consider:

    Saving doesn’t necessarily mean denying yourself what you’d like to have. T. Harv Eker taught me to think of saving as “paying myself”. When I put away a certain amount every time I have money coming in, I think of it as the salary I pay myself.

    Spending doesn’t have to mean going over the top either. If you spend money on yourself and things you love, it can make you happier and feeling well-cared for. The trick is to know what to spend money on – simply throwing cash at everything which takes your fancy, is definitely not the way to go.

    There is a fine line between impulse purchases and things you truly love. Impulse purchases are pretty things which catch your eye, online or in a sale. You get a momentary rush of happiness from buying it, but it wears off quickly. If you, however, purchase something related to your passion(s), you will get enjoyment from it long-term. These are the things which truly make you feel abundant.

     

    The multi-passionate issue

    There’s another complication if you happen to be a multi-passionate like me. The issue is that there are simply so many things we love! Applying the filter I suggested in the previous section can still get you in trouble as a multi-passionate; you could always justify your purchases because they aren’t a fleeting wish but represent something you are actually passionate about.

    The answer to this issue is prioritisation. Even the biggest multi-passionate cannot focus on everything at once. Here’s an example: For me, the last 12 months were about following my passion for historical combat and archery. In order to get going, I had to spend money on equipment and training, and so everything else took a back seat.

    I tend to video the fights at our swordfighting club’s tournaments, and for this I use my iPhone which has a surprisingly good camera. A friend once commented that I should buy a “proper” video camera and I told him that it’s just not in my budget right now. He said it would cost no more than a few hundred bucks, but the thing is, I have so many different passions to spend “only a few hundred” Euro on that I need to draw a line somewhere. Maybe in a year or two, I’ll focus on photography and video, which I also love, but right now my budget is spoken for elsewhere.

     

    The key to it all

    In my experience, the best way to keep your expenses in balance and be able to both “pay yourself” through saving, and treat yourself by spending, is to allocate your money by percentages. You need to know your fixed expenses every month and figure out which percentage of your income is needed for these. Let’s say it’s 70%. Then all you need to do is allocate the remaining 30%.

    You could reserve 10% for gifts, 5% for donatios, 5% as “Play Money” and 10% for saving. Play Money means an amount you can safely spend even on impulse purchases if you so choose. It’s yours to blow, every single month.

    With this system, you achieve two things: You will never overspend on anything, because the budget is fixed in advance, and you will grow more abundant as your income increases. Ever notice how every time you get a pay rise, you still don’t seem to have any money left at the end of the month? The truth is that when money is available, we will spend it – unless we have a system in place which allocates a certain percentage to a certain budget.

    Make sense? I suggest you try it out. It’s remarkable what peace of mind a simple system like this can bring.

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