Except for the really rich, we all need to watch our spending. Money management is a very simple concept; spend less than we earn! Easy to say, but difficult to do especially at various stages of our lives.
When we are young we are like a growing business, we need to invest in homes, our families and other things for getting established. This makes it almost impossible to spend less than we earn, so it is necessary to use debt to build our lives. It is also necessary to establish priorities for what we buy with cash or debt.
If we prepare a budget early on it will help us get control of our necessities very quickly. If we are honest we discover that it doesn’t take a lot of income to just survive. Then we need to focus on making enough money to pay for them and have some money left over, or a profit as a business would call it. Our profit should be invested in a backup fund and other things we need to build our lives and live free. This is a very over-simplified financial model but it is a very fundamental one.
Prioritizing our expenditures that are not necessities is where we often get into trouble. Over spending results in high credit card balances that are difficult to be free of and only makes it more difficult for us to invest in the things we really want, such as a house and improved living standards.
So, how do we establish priorities on how we use our discretionary cash? There are many resources for guiding us in making these decisions, but I have another way to look at it. We should prioritize our discretionary spending on what will make us happy!
My definition of happiness it to have inner peace, an other’s centered purpose, and to make a living that gives us freedom. If we have credit cards that are over extended we will worry and have stress that inhibits our inner peace. If we focus too much on just ourselves, we will only see tons of things we want for self fulfillment. We may also fall in to envying others for what they have and seek to get those things for ourselves. We can become greedy, even if we are not wealthy. We often fall into a “pity party” when we get to self centered and believe we are “victims” as we are not paid enough, and don’t have as much money as we deserve. This will only take us down and destroy our inner peace.
If we learn to be thankful for what we have and understand how much others don’t have, our attitude can change. We can even consider using some of our discretionary money to help others.
So our spending priorities should be based on a higher level, that of having real happiness; inner peace, purpose and freedom that comes from controlling our debt. Some would call this avoiding instant gratification, I call it seeking total happiness.
With each expenditure we make we should ask ourselves the simple question, will this really make us happy?