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One of the distinct differences on this site compared to many other personal finance and FIRE websites is that I want to remind people not to forget about the heart. So many people in the medical field went into medicine for the right reason, a truly altruistic desire to help others. Yet, I know many of these same people burnout because they forget the “why.” This same premise occurs in the personal finance community where people forget that, while it’s important to achieve your financial goals, it is also important to remember why you set out on this journey: to obtain the financial freedom to have a life well lived. You can obtain both wealth and wellness at the same time by making both your head (financial decisions) and heart (things that bring you joy) happy! This is accomplished via our philosophy of the day: Intentional Spending!
What is Intentional Spending?
The idea behind intentional spending is to recognize that, while budgeting/tracking spending is vitally important to your financial success, it is also important to let loose every once in a while.
However, there are many studies that show Americans are really bad at letting loose. Americans leave billions of days of vacation unused each year. Even when we do take vacation, we apparently aren’t very good at it. It often leaves us less happy when we return from vacation than when we left. The reason? Well Harvard seems to think that it’s because we plan poorly when we do take the vacation and the travel stress (if planned poorly) off-sets any happiness we would glean from the trip. Interestingly there has also been good research to suggest that how far we commute to work also affects satisfaction! Apparently, how much and how well we travel has a profound impact on our enjoyment in life.
Because we aren’t any good at letting loose ad lib, this means we need to be very intentional when we do let loose. Just don’t forget that the vacation analogy extends even further. We’ve discussed that a poorly planned vacation with loads of travel stress actually hurts you. Similarly, spending money you don’t have and that isn’t in your budget will simply increase your stress!
If it causes you to go into debt, finance/leverage a purchase, or prevent you from adequately saving it is likely not worth it! That is not intentional spending. Intentional spending makes your head and your heart happy! If it isn’t accomplishing both, it isn’t intentional spending.
Steps to Intentional Spending
- Part of Intentional Spending means budgeting. Don’t spend money without thinking about where it is coming from or what it will affect. Make sure that you have the money to spend and that it will not impact your ability to aggressively save or destroy debt! Are you still going to get to your Financial Plan goals? Check this box first. This is step 1, 2, and 3 of intentional spending. Use products like mint or personal capital to help here.
- Take inventory. While we can consult the research on what makes people happy, it is also important for us to spend time thinking on the subject for ourselves. Most studies on the subject find that people generate more satisfaction from experiences rather than from things. This could mean going skiing in the mountains, spending a long weekend at the beach, or going to a Big City you’ve never seen. As mentioned above, though, it should be well planned and travel stress kept to a minimum!
- When you aren’t spending money on experiences and do choose to spend money on things, take some time. In fact, if it is a substantial cost I recommend you endorse The One Month Rule. This will allow you the time to do research. Find the best product for the best price. For example, my wife and I are at the point where we need to replace our mattress. Apparently, mattresses are most cheaply purchased in May. So, we will wait til then to buy it. After all, there are very few “mattress emergencies” that would necessitate a dire need to buy one!
- When we receive a bonus, raise, or windfall; this is the perfect time to apply The 10% Rule. I recently did this after I found out I gave the government an $8200 interest-free loan (oops). I’ll be writing a post on this, but my tax refund was used according to the 10% Rule. While I love the taste a charcoal grill produces, it often takes too much time! In my attempt to spend more time with my family, I bought a gas grill (check out the picture) after doing some research. The other 90% went straight to my student loans. [This was only 5% actually. We spent the other 5% on equipment for my son’s Taekwondo class and to replace my thermocouple on our water heater after our pilot-light wouldn’t stay lit! Unlike mattresses, having no hot water is apparently a 1st-world country “emergency” if you have a wife and kids!]
The purpose of the intentional spending philosophy is to remind you of one thing. As long as you are obtaining your financial goals, it is perfectly acceptable to spend money! Budgeting and personal finance can become so restrictive that it affects your marriage and maybe even your mental health.
Just like you deserve (and need) to take that well planned vacation to relieve stress, produce satisfaction, and increase motivation at work; you need to perform some intentional spending!
What do you think? Do you spend intentionally? Do you overspend? Does your budget stress you out? Do you need a break? Leave a comment. I want to hear your intentional spending stories!