In the previous blog post I discussed Dan Buettner’s findings on financial well-being from the Blue Zones. His takeaway when it comes to finances is simple: Save Mindlessly, Spend Thoughtfully. It’s best to start by saving and setting up a system to do so automatically before attempting to spend thoughtfully. If you focus on changing your spending before you start to change your savings there may not be enough money left to save.
I find that saving mindlessly is easier than spending thoughtfully. Once you set up a savings system you can forget it. When it comes to spending we make daily decisions on it. Learning to question whether a purchase is in one’s best interest can be exhausting. Thankfully, with practice it will become much easier. This is especially true if you have a budget that prioritizes your values. You also need to allow yourself enough flexibility to avoid feeling deprived.
Figure out your Big Rocks First
In an article entitled The Big Rocks: How to Prioritize Your Life and Time JD Roth discussed his impression of Bob Clyatt’s book Work Less, Live More. Clyatt revisits one of Stephen Covey’s main guidelines: unless you prioritize your values (Big Rocks), small things (Sand) can eat up your energy and time. The same applies when it comes to spending. Imagine your life is a container and you get to decide how to fill it. In my life exercise is a Big Rock while watching TV is Sand. Where I to fill my life with Sand I’d never get to the gym…
When it comes to money the Big Rocks are housing, transportation, savings, etc. Once these are taken care of you can fill in the gaps with Sand. Sand would be discretionary spending on entertainment, new clothing, or whatever else you like. You get to decide what the Big Rocks are for you. Once you do, give them the space they deserve. At the same time without the Sand your container would never fill up: that Sand gives you space to be. As motivated as I am to work on my blog, I also make time for passive entertainment. I never know where inspiration for a blog post can come from.
What if your Big Rocks are Out of Balance?
Say your housing takes 50% of your take home income. That can be very stressful because it does not leave room for fun and savings, unless you made the decision purposefully. Many people adhere to Dave Ramsey’s gazelle philosophy of cutting out all the Sand spending when paying off debt. That did not work for me, but it may work for you.
If you are unhappy with the current percentage of your expense breakdown you can make changes. A budget is a living document because it reflects your current priorities, income, and life stage. Take the time to occasionally re-evaluate your budget to verify that it still fits your life.
However, be wary of perfectionism. No matter how much you tinker with your budget, the real work is out there when you’re making those daily money decisions. Seth Godin discussed how we can get stuck in the details because it’s easier than looking at the big picture.
When I first created a budget I used to spend too much time tracking every penny I spent. Not only did I obsess over whether everything added up, I also judged myself harshly whenever I spent any money on Sand. My current system only focuses on the Rocks. I know what my life costs, so then I figured out a monthly allowance for Sand and the remaining goes to savings.
This helps me avoid the double D’s: debt and deprivation. Since I have an allowance and targeted savings accounts I don’t incur debt. This same allowance gives me flexibility to spend. I no longer agonize over every tiny financial decision; a lot of those decisions are only Sand that round out my life.
Small Expenses do Add Up
When I began the allowance system I took advantage of my natural tendency to hoard money. You may not share this tendency, so it will take some exploring to figure out what works for you. Happiness researchers Sonja Lyubomirksy and Joseph Chancellor point out that spending money on experiences brings about more happiness than buying stuff. After some time I discovered that my favorite things to spend money are on books for friends, any type of live entertainment, and classes. I expect this list to change as I grow older and my life changes.
Small expenses definitely do add up. What are they adding up to in your life? Are they another source of stress or do they add to your well-being? Often I see friends get caught up in trying to change their daily spending habits without taking a look at their large expenses. The effort required to address large expenses, such as downgrading your car or shopping for the best insurance rates, gives more results than deciding to become a hermit and not spend any money on entertainment.
On Being vs On Having
The simple guideline to “Save Mindlessly and Spend Thoughtfully” can put money in its proper place: money is a tool. I often feel society expects me to acquire as much of it as possible. This may be in capitalism’s best interest, but is it in my best interest? How does it affect my community and environment? Does the goal of endless acquisition add to my life?
I was recently introduced to a philosopher who addresses this question in Maria Popova’s Brain Pickings newsletter. Popova does a wonderful job of distilling Erich Fromm’s ideas on being in her article The Art of Living: The Great Humanistic Philosopher Erich Fromm On Having vs Being. Fromm states that “The goal of living [is] to grow optimally according to the conditions of human existence and thus to become fully what one potentially is.” When my goal is to be who I am more fully I recognize that I’d rather read than shop.
I encourage you to visit Popova’s article to learn Fromm’s necessary conditions for human flourishing. I walked away from the article feeling inspired and energized. I can see that my focus has moved away from getting money, stuff, status, pleasure, etc. I now focus on integrating myself into a whole person; I believe we all want to be the best version of ourselves. Doing so requires self-reflection and curiosity into what my values are. Once you become aware of your values (or Rocks) it becomes much easier to spend and earn money in a way that reflects them.
I’d love to hear whether you’ve identified the Rocks in your life. Do you make it a point to prioritize them?