Above a certain baseline the correlation between money and happiness grows weak. Yet we easily fall into the habit of spending too much and getting too little return on our investment. I was once laid off from a failing startup and went through considerable stress over how I could possibly enjoy life while I got by on unemployment insurance and hunted for a new job. It took a wise friend walking me out to a beautiful park in the middle of a warm weekday to point out to me that I had now had access to all kinds of free or cheap pleasures that were exactly what I’d been substituting for while putting in my long days at the startup. Don’t tie your perception of relaxation or satisfaction to the act of spending money; they aren’t the same thing at all.
What do you shell out money for every month? Sure, rent or mortgage, utilities, food, but what about non-essentials? Take a look at your routine expenses and the time you spend enjoying the results of them. How many hours do you watch those extra cable channels? What's does that mean you pay per hour? Do you still plan to be spending that much time that way or are there other things you'd do if the temptation wasn't there? Do you read the paper every day? Is it worth the subscription? What about the magazines you get? And that gym membership? Are there free exercise methods you'd use just as often? Food spoiling in the fridge before you eat it? It doesn't matter if it's a small expense; if it's not giving you enough benefit, then stop spending that money. Save it or spend it on something that matters to you more.
As you focus on what you want and don't want in your life, there are probably some things you'd like to save up some money for. It can be hard to do that, though, if you find that you never seem to have extra at the end of the week. Keep your eyes on the prize. Take a look at what you have to spend each month (rent, bills, payments to reduce debt, groceries) and what that leaves you for flexible expenses. Assign yourself an amount that you get to spend each week (or fortnight or month) on optional things.
Take two index cards. Tape the cards together on the long edge. On the inside left, write the list of things you want to be saving up for and the amount that will take. On the right, put the amount you have assigned yourself as available for optional things. Every non-essential purchase should be entered and deducted on the right. Before making a non-essential purchase you'll see your wishlist and think about whether it's really worth it. You'll also get a clearer picture of where your money goes. For example, here’s what the right side might look like:
- latte & croissant $5 $ 95.00
- mocha $3 $ 92.00
- new TMBG album $17.50 $ 74.50
- latte & croissant $5 $ 69.50
- mocha $3 $ 66.50
- pizza & beer with pals $20 $ 46.50
- latte & croissant $5 $ 41.50
If one of the things on the wishlist side was “espresso machine $200,” it’s pretty obvious that it won’t take that long to save up for it by not going out for coffee drinks (or recoup the cost by buying it now). If the other thing on the wishlist is an exercise bike, knocking off the croissants will not only help save up, but will also make it less necessary.
When you need to conquer debt as well as save up for new expenses, try taking your charge cards out of your wallet and securing them at home. Wait 24 or more hours before making non-essential purchases. Start paying more than the minimum due on the bill and get yourself out of living in a credit crunch. Mediocre mochas may be a bad way to spend your money, but they are guaranteed to bring you more enjoyment than bank finance charges. Knock out those really needless expenses first, then improve your imperfect ones.
Beware of false savings. In my time I've had memberships to huge warehouse stores. Costco is the archetype for this, but there are other similar places where one gets ‘great deals’ by buying in larger quantities. I always find, after the initial glut of buying lots of things for relatively less money, that I'm overall spending more than I would shopping at neighborhood stores – even non-chain ones – and ending up with more than I can use or things I don't really need. What's even sillier about it is that I wind up buying not quite what I wanted – different brands, other flavors, higher calories – because the selection is more limited. Take a good hard look at your shopping habits and the kind of eating habits they're leading to. Try taking a month off from the big box stores. Shop locally, get more fresh fruit and vegetables, pick out ingredients to cook with or make a sandwich for tomorrow's lunch instead of a frozen entree. Visit the farmers' market and find the nearest good bakery to your house. At the end of the month see how you feel, what you're eating and what you've spent. Chances are pretty good that the delicious organic produce that's giving you loads more energy has been easily paid for by not having unexpectedly bought a boxed set of DVDs for a show you liked when you were twelve, a five-attachment cordless drill you still haven’t used, and a pair of ill-fitting orange sneakers with totally cool treads.
It’s not just about wasting money; you can also overspend your health. Go read the can or bottle of the beverages you're drinking today. Here's a good example of the kind of thing some of you might find:
Carbonated water, caramel color, aspartame, phosphoric acid, potassium benzoate, natural flavors, citric acid, caffeine.
What do those ingredients do to your body? Are you draining yourself or fueling yourself? Drink more water and start cutting out the sugary (or fake sugary) caffeine bombs. If you're relying on the bump from your drinks to get you through the day, you're masking a bigger problem and making your body pay the price.
Enjoy what you've got. Maybe tonight's a good night to stay home, make some dinner from ingredients you already have or eat up some leftovers, watch that movie that's been sitting around, read a book off that stack you keep intending to get to, or play a favorite old game that's been gathering dust. Without spending, you can both have a really nice time and remind yourself of what is good about your life.
When you do spend, target it towards what brings you the greatest returns. Hate cleaning, but love to cook? Hire a maid service, enjoy the freedom from some chores you hate, and offset the cost by eating out less and making more great meals in your nice clean kitchen. Love city life, especially the dining out, but hate your long commutes from the suburbs? Move to a little apartment or condo in a great neighborhood nearer to work and ditch the car. You can make much more enjoyable use of the hundreds of dollars you’ve been spending on gas, car payments, insurance, maintenance, parking, tickets, etc. With a magic wand, what would you eliminate – housework, driving in traffic – from your life and what would you add – culinary adventures, convenient nightlife? Don’t assume it’s impossible. Start brainstorming about all the ways you can trade the bad for the good.