Existential Money Questions – It’s More than Just the Numbers

I was trying to figure out potential financial topics to write about so I searched online for common financial questions. I found technical questions like the ones below from Investopedia:

  • How do you file IRS Form 709?
  • Are student loans amortized?
  • Am I losing the right to collect spousal Social Security benefits before I collect my own?
  • Is it a good idea to add a reverse mortgage to your retirement strategy?

I found credit related questions answered by a financial planner over at Business Insider:

  • What’s the best way to increase my credit rating so banks are knocking at my door with awesome offers?
  • Any tips on negotiating a lower interest rate?
  • Is it better to pay off your entire monthly balance, just the minimum, or somewhere in between?
  • Is it true you can negotiate a “pay off amount” with your credit card company if you can’t afford to pay down your whole balance?

And here are a few more interesting ones from Fox Business:

  • Should I change from monthly mortgage payments to biweekly mortgage payments?
  • Should I co-sign for a loan, and can I protect myself?
  • If my retirement accounts are fully funded, how should I invest the rest of my cash?

But it was difficult to find questions like the ones I ask about money and finances. I think my questions are probably more like social science research theses than blogging friendly questions. For example, I often wonder about the questions below:

  • How do I reconcile the fact I want more and the fact that by being a citizen of a developed country I have more than 80% of the world’s population?
  • Why would someone tie themselves to a job they dislike with golden handcuffs like a new car every year and a mortgage that keeps them up at night?
  • Is it possible to use capitalism in a way that doesn’t destroy the environment and ourselves in the process? Maybe it’s something along the lines of B Corporations, which aim to benefit the shareholder, employee, customer, and community.
  • Why do women earn less? Why does asking for a review feel more difficult than giving a professional presentation completely naked?
  • How is longstanding wage stagnation related to Trump’s election?

After my quick web search I am happy to say that the internet has space for me. I am here to discuss they many existential money questions I have. In How To Read a Book the authors state that the big questions are not really answerable. The answer lies in the discussion itself. By talking about the issues we can outline where we stand.

So let’s talk about money. Do you have any existential money questions?

Why Hire a Financial Planner?

Although I’ve never hired a financial planner, I have had to hire an expert to help me do something I could potentially have done myself. Earlier this year I switched gyms and the new one had less exercise classes. After two years of either going to a class or doing cardio I had still not started weight lifting. I always had a reason to skip it. The truth was I didn’t know how. After some half-hearted attempts to learn I realized I was not disciplined enough to learn this skill on my own. The routines online confused me and my motivation barely lasted past five minutes.

Shortly after joining the new gym they offered me an introductory personal trainer session. At first I was an adamant no. At the time my main objections were that it’s expensive and it’s something I should be able to figure out on my on. But then I saw that I could afford it and realized that I was probably not going to learn it on my own. So I took the plunge and signed on for a one year contract. I can now happily say I am comfortable with my weight lifting routine. And a positive side effect is that my butt has never looked better!

So what does my personal trainer have to do with a financial planner? Both professions have experts who motivate you through behavioral changes. They have been trained to quickly spot possible problems. Plus the best coaches, either for fitness or finances, are just as excited about your success as you are. If it’s fear that’s holding you back, take a look at this great article by Michael F Kay from Financial Life Focus. Continue reading “Why Hire a Financial Planner?”

Sufficiency and your True North – Celebrating Enough

The Soul of Money by Lynne Twist is not your typical personal finance book. It does not go into how to get out of debt or where to put your retirement investments. Instead, it is a thoughtful book that reminds us that we already have enough. We have probably all heard that the endless pursuit of more does not lead to an enjoyed life. It only leads to a need for more. The issue for many of us is that we forget this simple idea, especially when we listen too closely to the consumerism in society. Twist shares her transformation away from the mindless pursuit of more towards a more aligned lifestyle for herself and her family. Continue reading “Sufficiency and your True North – Celebrating Enough”

Career Exploration Before Signing on for College Debt

One of my nieces is starting her senior year of high school and is stressed about college. She knows she wants to go to college, but is unsure of what she will study and how she will pay for it. This is very natural, especially for children who are the first ones faced with the luxury/burden of deciding what they will do for money as adults. A few generations ago most people grew up to do what their family did. The children of blacksmiths were blacksmiths. The children of farmers were farmers.

My niece is certain that she wants to attend college because she likes academics. However, college is not the only option. High school graduates can join the military, go to a trade school, start a business or get a job. Most high-paying jobs do require a college degree, especially if you want to move up in a company. But if you go to college just because it’s expected of you, rather than because of your own internal motivation, you may have trouble completing the degree requirements. If academics is not your thing consider trade school; the school requirements are shorter, the cost is lower, and the jobs are unlikely to be outsourced to other countries.
Continue reading “Career Exploration Before Signing on for College Debt”

Neal Gabler Publicly Exposes Himself – Taking Shame out of the Money Conversation

Last month The Atlantic published a very moving article on financial insecurity. Author Neal Gabler shared his private battle with financial illiteracy and shortsightedness in an article entitled The Secret Shame of Middle-Class Americans. If you are struggling with your finances, or know someone that is, I strongly recommend you read the whole article. 

Gabler begins by stating that he is one of the 47% of American who would need to borrow in case of a $400 emergency. He goes on to detail the decisions and assumptions that got him to this place. He assumed he’d make more money next year; that his children needed to go to a private school; that he didn’t really need to tell his wife what was going on with their finances. He did not do anything wrong or irresponsible, he simply went for the American Dream using reasonable amounts of debt and risk. He ignored any signs of financial distress until it was too late. Pair this with the fact that his income after adjusting for inflation is the same as it was twenty years ago and you get a perfect storm.

The article ends with Gabler sharing how he now manages his finances; it is not what he had imagined twenty years ago. Although he has a good income, a long career, and a graduate degree he has not taken a vacation in ten years. He no longer uses credit cards. He and his wife only eat out a few times a year. He is now doing the things that we all know we should do to do well financially. But why is it so hard for us to start here and to do these things by choice rather than necessity? And why are we so ashamed to talk about finances?

Guilt vs Shame

Gabler powerfully points out that as a country we feel ashamed that we cannot attain the American Dream. In my opinion the American Dream may be the cause for all of this financial overextending with debt. In his own words:

In a 2010 report titled “Middle Class in America,” the U.S. Commerce Department defined that class less by its position on the economic scale than by its aspirations: homeownership, a car for each adult, health security, a college education for each child, retirement security, and a family vacation each year. By that standard, my wife and I do not live anywhere near a middle-class life, even though I earn what would generally be considered a middle-class income or better. A 2014 analysis by USA Today concluded that the American dream, defined by factors that generally corresponded to the Commerce Department’s middle-class benchmarks, would require an income of just more than $130,000 a year for an average family of four. Median family income in 2014 was roughly half that.

It looks like most of us are destined to feel ashamed that we cannot reach the American Dream. To make matters worse we have a tendency to hide anything that goes wrong, especially in our financial life. Personal finances are rarely discussed openly because we feel it is a private failure. People are more likely to talk with someone about breaking their diet than the amount of credit card debt they carry. This secrecy around finances means people may be slower to see they have a problem. Not only does the secrecy mean we continue to dig a hole longer than needed, but we are ashamed of it.

Professor and vulnerability researcher Brene Brown says shame is “highly correlated with addiction, depression, violence, aggression, bullying, suicide, and eating disorders.” In her Ted Talk on shame Brown defines shame as feeling “I am bad,” whereas guilt is “I did something bad.” Shame withers you down, while guilt can teach you. In order for shame to grow it needs three things: secrecy, silence, and judgment. You can definitely see all three of these ingredients in personal finances.

In his article Gabler shows us how he moved from ignorance to shame to guilt and now to growth. Many of us can relate when he describes how small decisions and assumptions led him down a path where he lived beyond his means. A lot of the time we ignore how our decisions impact our financial well-being because we think we’ll use debt just for a short while until things get a little better. We may even completely neglect acknowledging our finances if we feel uncomfortable talking about money. From there shame can creep in as we see our finances in the red.

When I had to go into debt to cover groceries I felt ashamed. I felt I had failed to manage my money and angry that I was unemployed despite my post graduate degree and years of work experience. Thankfully I talked about this with a friend who let me know I could change. She helped me look at my situation and make a plan that moved me in a better direction. Her encouragement gave me hope and I plan to return her service to my future financial planning clients.

Gabler mentions visiting a financial counselor who had him get rid of credit cards and start paying off debt. When we share what we are ashamed of with a trusted friend or professional we can then begin to look at the behaviors that got us there. We may be tempted to try and change the behavior on our own, but if that fails seek a trusted friend to discuss the issue with. Once you find one behavior you can change, or make a plan to get out of your current situation you will feel empowered and begin to let go of shame. Keeping in touch with your friend will help you stay accountable. Moreover, he or she can encourage you when you are tempted to go back to previous habits.

Changing the American Dream

Gabler is incredibly brave for sharing his story. I hope that many people will take a look at their own financial decisions and focus on changing behaviors that got them in trouble or are heading them down that road. Moreover, he does a wonderful job of showing us how 47% of Americans find themselves in similar straits. Wages are not growing the way they used to. People are graduating from college with crushing debt to a lukewarm job market. Our expectations of ever increasing income and better gadgets are making matters worse. All of this is blatantly apparent whenever an unexpected expense comes up and we need to use debt to cover it.

Gabler made decisions that aligned with his values, but they ignored his financial reality. A lot of stress comes when we’re unsure of cash flow and have no savings for those always reliable unexpected emergencies. My call to action is that as a society we can save more so that when life throws us an extra expense we can take it in stride without digging a debt hole. We can plan more so that we do not need to saddle teenagers with mortgage size debts in order to get an education. We can learn to live within our means to enjoy the freedom of being satisfied. We can learn to be happy while paying off debt because once the debt is gone we’ll know how to be happy without spending more.

The decision to include financial reality when making life choices can feel like an unwanted chore. Talking about money can awaken a fear of uncertainty and a sense of being overwhelmed. That fear is a signal growth is needed. Maria Popova wrote a beautiful article on how fairy tales can teach us the importance of being scared. She reminds us that “the terrible and the terrific spring from the same source, and that what grants life its beauty and magic is not the absence of terror and tumult but the grace and elegance with which we navigate the gauntlet.” 

How do you navigate the gauntlet of finances? Money isn’t everything, but avoiding planning can make it feel like it is. Gabler says financial worry crowded out everything else from his mind. By sharing his path Gabler gives us an opportunity to share our own experience with financial illiteracy and insecurity. Shame tells us that we are wrong for being where we are. Talking about what shames us is an act of courage. Changing behaviors that no longer serve us is the way of growth. My hope is that as a society we move away from shame over being unable to reach a materialistic dream. My hope is that we move away from the dream of a rich bank account to a reality of a rich life.

Have you ever shared a financial issue you were ashamed of? What was the experience like?

Giving Back – Being Charitable is one of the Best Uses of Money

Personal finances encompass your entire relationship with money, that includes giving to charity. We all routinely receive requests to be charitable. Most of us probably contribute to causes we believe in, even if it’s only sporadically. According to Charity Navigator in 2014 total giving was $300 billion, or about 2% of US GDP. This is the equivalent of the GDP of all of South Africa in 2009. That’s impressive. We give so much each year that we could fund an entire country with a population of 49 million people. You can find a detailed report of what charities we give to here.

Why do we give?

Simply put, we give because it feels good to spend money on other people. Eric Baker’s article What’s one way where money definitely brings happiness? shares the psychological benefits of giving. The article describes a survey conducted by the Harvard Business Review on people’s happiness after receiving a profit sharing bonus from their company. They found that those who spent the bonus on charities or gifts for others showed increased happiness for longer than those who only spent it on themselves or bills.

Giving to others not only makes us happier, but it has a host of other benefits:

  • Charity as a way of leaving a legacy
  • Charity as a way of building community
  • Charity as a way of providing social welfare
  • Charity as a way of creating meaning in your life
  • Charity as a way of creating change in the world and shaping society
  • Charity as a way of showing gratitude and cultivating a feeling of abundance

I did not begin to give until I developed a budget with my mentor and she suggested I consider giving back a set percentage. Her reasoning is that over time my financial situation will improve and I will be able to give more. I started by giving 0.5% to the church I attended at the time. Just as my mentor predicted, that percentage has increased as I have paid off debt and my income has grown. I now contribute to that same church even though I no longer attend, as well as NPR, and a local volunteer organization.

I followed my mentor’s suggestion because I trusted her judgment and wanted to emulate her. Growing up my family did not contribute to charities, so this was not something I had ever thought about before. I found that giving when I felt like I had nothing to give really did create a sense of abundance in me. Even though at first I was only giving a tiny amount, I felt all of the psychological benefits.

I recently received a contribution request from a program I was a part of in college. I’ve given to them before, but this time they were asking for a larger amount and for multi-year commitments. Their request made me take a second look at my giving. I was happy to find that there is space in my budget to give more. Anyone who has ever realized that they could support something that gave to them knows how satisfying giving can be. This college program taught me how to work in corporate America and gave me the confidence to do so.

Although my family did not give routinely to charities, they did model other types of charity. I remember one instance when a man came to my grandmother’s house in Mexicali, Mexico and she had a set of clothes set aside for him. After his short visit Grandma told me he had recently been deported from the US with only the clothes on his back. He was now trying to decide whether to sneak back into the US or return home to his family in southern Mexico. Either way, his options were grim. He could risk his life to find work or he could go home and struggle to makes ends meet with his family.

In one short generation so much changed in my family. I grew up seeing poverty, but I never experienced it myself, although both my parents did. It is a miracle that my father experienced hunger as a child and that I am now at the other extreme where I can actually give back. No wonder I feel startled to realize that I now give back in a structured way with recurrent payments. Had it not been for my mentor’s encouragement, I may never have begun the practice of giving on a routine basis.

In addition to giving money we can also give time. Volunteering is a great way to build relationships and create more purpose within one’s life. In a way, giving time can be more costly than giving money. Money is a replenishable resource; you can make more of it. But time is finite. When you dedicate time to something that time can never be replaced. As a kid I was a very active volunteer because I love talking with people and being of service. Now that my life has gotten busier I’ve moved away from giving time to giving money.

An additional benefit of giving is the resulting sense of community. When we give to a cause we believe in we feel connected to it and are more likely to encourage others to check it out. This also gives us a sense of a bigger purpose in life.

When you are just getting started figuring out your personal finances, giving may seem like a distant concern. For a while you may not be able to give money or time, but you can always donate old items to charities, or at the very least you can plan to give one day. Simply imagining what you would like to contribute to will give you a greater sense of direction.

Take a look at your giving habits and determine how much you already give. You may be surprised at the amount. If you like, you can begin to grow that number or you can plan to one day grow the number. Before you do decide to give make sure that you have a livable budget. If your budget does not give you enough space to live comfortably it will be difficult to give on an ongoing basis.

Also, remember to give because you want to and can do so. Some of us may be tempted to give in order to show others that we are doing well or because we feel we should. I suggest you be very clear on your motives for giving; otherwise down the road you may even resent the organizations that you give to. Just like with everything else, moderation is key.

Do you remember the first time you realized you had enough for yourself and to give away? What was that like?

Is it time to align your life? – Does your Spending Reflect your Values

Have you ever thought that it was time to consider downgrading your lifestyle to cut expenses? Downgrading your lifestyles sounds painful. It sounds like something is being taken away from you. Instead we can call it aligning your lifestyle. You can ask yourself: Does your lifestyle enable you to become the best version of yourself? If it doesn’t then there’s the option of aligning it.

In my life I’m considering a re-alignment because of several reasons. I am going to deplete my savings to replace my car within the next couple of months. In four months I will be purchasing a certificate program to become a Certified Financial Planner, further depleting my savings. Within the next year I plan to re-start my career at an entry level position in the financial planning industry. In other words, I will most likely experience a drop in my income. And finally, in the next few years I would love to launch my own practice and become self-employed. This will require a nest-egg to get me through the initial three years.

I am very vigilant about avoiding lifestyle inflation, however, I rarely look at cutting things out. The last time I seriously looked at cutting expenses was five years ago when I began my debt payoff journey. Given all the upcoming changes in my income and the major upcoming expenditures I have begun to consider what else I can cut out. And let me tell you a little secret: it is painful to consider cutting anything out.

What’s the why?

I’ve shared what has led me down this path, but what would get you to consider re-aligning your lifestyle? It could be one of the following:

An unexpected expense that is beyond your current savings

Examples of this abound. Say your car needs to be replaced, you’re having a baby, your house requires major improvements, a recurring medical issues comes up, etc., etc. You get the idea. Regardless of the reason for the expense, it is more than you can afford without going into substantial debt

You expect a decrease in your income (or are currently experiencing it…)

Maybe you’re going back to school. Maybe you’re retiring. Maybe you’re taking time off work or will be working part-time in order to care for family. Or maybe your boss gave you a pink slip. Whatever it is, your income is no longer what it used to be.

You want to build up your savings or pay down your debt faster than you can with your current lifestyle

What if you dream of traveling across the world? Or of stating your own business? Maybe you want to give a substantial amount of money to a cause. Or maybe, you just want to be free of the ball and chain called consumer debt. These are just some examples of the many dreams that require a drop in expenses before they can be achieved.

You are unhappy with your current lifestyle

It may be that you are tired of having so much stuff to maintain and insure. Last year I visited Cuba and I came back feeling my lifestyle was too extravagant with all of the eating out and an entire 750 square foot apartment all to myself. Or it could be that you have realized that you cannot actually afford your current lifestyle and are paying for it with debt and loads of excess financial stress.

There are many other reasons for wanting to align your lifestyle. The list above is a sample of broad categories. Regardless of your reason I’d suggest you proceed deliberately.

Aligning your lifestyle can have a painful adjustment period. Robert Cialdini, an expert on the science of influence and Professor Emeritus of Psychology and Marketing at Arizona State University, states that this is due to the scarcity principle. This principle states that when something becomes less available we value it more and thus want it more. For example, I currently live alone and I am completely free to to use whatever part of the house I want and listen to music as loudly as I want with or without pants. Where I to get a roommate to lower my housing expenses I would need to adjust. My first instinct is to imagine the changes I’ll need to make will be overwhelming. In reality however, I spend most of my time at home at my desk in silence wearing a skirt. I am certain I can find a roommate who would be okay with this.

What do you do to align your lifestyle?

Once you decide that you need to align your lifestyle in order to reach your dream, you then get to decide what needs to be changed. Start by writing down your expenses and placing them into buckets of what can be changed from easiest to impossible. The easier things are anything that would have little effect on your quality of life. The harder things would require major life changes. Then there’s the sacred expenses that cannot be altered. Put it all on the table and recognize that whatever you decide is okay. Below is my list with some of my expenses.

  • Easiest: Starbucks, video games, new clothing
  • Hard: gym, wine membership, eating out
  • Sacred: housing, internet, health insurance, car insurance, retirement savings

Given my dream of changing into a new career I need to look at the big expenses. I do not drink enough coffee or buy enough clothing for changes in those expenses to meaningfully affect my budget. To make lasting impact on your budget target you really need to target recurring expenses. It’s much easier to cancel your wine membership once than to rely on your will-power to pass up every opportunity of Starbucks.

The real impact comes when you look at those sacred expenses. Can you lower them somehow? More specifically in my case, can I actually give up living alone? That leads us to the next question…

How do you get through the pain?

Let’s say you’ve decided to align your lifestyle and know what you will be targeting. It’s now time to take action. Here are the steps I suggest:

1) Determine your bare minimum. What do you absolutely need?

As I contemplate getting a roommate I know that at the very least I need my own bedroom and full access to the kitchen. Maybe you’ve decided to get rid of your leased car and are thinking of buying a used economy car with no frills. It could be that instead of getting Starbucks three times a week you will now limit it to those days when you only get six hours of sleep. Or you will set a limit on how often you go out with a friend who only wants to go to five star restaurants. You can set up guidelines on what an aligned lifestyle looks like for you.

2) Easy does it

Slow and steady will get you to your dream with less scrapes and bruises than forcing your way there. Take the time to think things through. Allow yourself time to make sure your decision is really aligned with your best interest. Don’t confuse a decision with a reaction to some outside stress, like getting a pink slip or reading about another person who launched their own business and is living in the Bahamas.

When we make changes before we are ready we are likely to slide back into old habits. Will-power is not an effective way to reach your dreams because it doesn’t last long. Moreover, big lifestyle changes take time. Even if I were to decide today that I do want to get a roommate it will take time to find the right-person. As Frank Sinatra said, only fools rush in.

Of course there is always initial discomfort whenever there are big changes. However, we can become accustomed to anything. Harvard Professor Daniel Gilbert states in his book “Stumbling on Happiness” that it only takes three months to become used to anything. You can see his 2004 Ted Talk here. In other words, give yourself plenty of time and grace as you become used to life without cable, steak, or a car of your own.

One last suggestion: remember that nothing is permanent. Say I do decide to get a roommate to save money. I may later on decide that the money is not worth the headache. At that point I can change again. And I can have the satisfaction of knowing that I truly tried to make it work.

Are you ready to align?

If you have a dream that requires you align your lifestyle with its pursuit then you’ll have to consider the following questions:

  1. Why are you changing?
  2. What will you be changing?
  3. How will you do it?

Above all remember why you are doing this. It also helps if you tap into a network of friends who believe in your dream. If you’re trying to cut down on how much you spend eating out, it’s okay to tell a friend you’d rather hang out with them at home and eat ramen. When those closest to you are supportive of your lifestyle changes it becomes much easier to adjust to the changes. When they are not supportive of your dream, it’s best to avoid the subject with them rather than sabotaging it. I had a friend who once said “Don’t tell your goals to trolls” because their doubt can seep into you.

For most of what I do my “Why” is that I want to make the most of my short time on earth. I began to seriously dream of becoming a personal financial planner after reading George Kinder’s book “The Seven Stages of Money Maturity”. There is one thought in particular that stood out to me:

Our first obligation in this world is to discover the circumstances in which our souls flourish. This is the truest and deepest meaning of freedom – living under the conditions that makes us most truly ourselves.

– George Kinder

I think this resonates with everyone. For some of us, our finances may not be aligned with our new direction. Thankfully with some effort you can change your lifestyle to reach your dreams.

Do you have a dream you’d like to save up for? Is there a “sacred” expense that you may consider addressing?

Beyond Hoarding: My experience tracking my spending for a year

I decided to get myself a big ticket item after tracking my expenses for a year. I often feel I spend too much, that I should be saving more money and eating out less, that I can’t afford to travel or go see shows. So I took a suggestion from Barbara Stanny’s Secrets of Six-Figure Women and decided to track my daily spending. I’ve yet to achieve the six-figure income, but Stanny points out that building habits early has big payoff’s in the long run. As I explained in my post What Type of Financial Planner Will I Be? I follow the Balanced Money Formula from Elizabeth Warren’s wonderful personal finance book All Your Worth so I already know where most of my money was going.

Balanced Money Formula
  • 50% Must-Have’s (rent, groceries, phone bill, min debt payments etc)
  • 30% Wants (internet, gym membership, eating out, etc)
  • 20% Savings (retirement savings, debt payments above min, etc)

I focused my tracking on my “Wants” spending, basically on all the non-essentials I could live without if I were to become unemployed. After a year of tracking this I am very happy to report that in 2015 I only spent 18% of my net income on Wants. How do I balance this with the nagging feeling that I’m much too extravagant for having an entire apartment to myself and that it’s ridiculous for me to buy any new clothes given my abhorrence of materialism? By giving myself grace. In order to enjoy my life I remind myself that I can spend money; that hoarding at the expense of enjoyment is not a virtue.

I started off by writing down everything I spend and building a simple tracker on Google docs. I already include internet and my gym membership in my recurrent expenses, for this exercise I was looking at everything I spend in addition to those two things. I had a lot of fun building the tracker because I am a data analyst by trade and I enjoy myself as much working in Excel as I do swing dancing or spending time with friends. My love for numbers is beyond words. After tracking my spending for a few days I began to create categories that reflected what I tended to spend money on.

You can see my main spending categories below with the percentage of the total, and below I’ve listed the smaller ones in order of largest to smallest

40% – Hobbies & Rec
Self-Actualization: Classes on spirituality or other growth related activities
Travel: Includes transportation, lodging, souvenirs, etc
Swing Dancing: …or line dancing, or clubbing, or anything related to dancing including drinks
Toastmasters: Club dues, or events
Entertainment
: Going to shows, comedies, anything related to random hobbies
CFP: Events with the Financial Professionals Association or educational materials

30% – Gifts
Celebrations: Weddings, baby showers, Christmas gifts, etc
Birthday: My birthday or other people’s birthday, includes presents and dinners
Self-Care: I treat myself to a Korean Scrub every once in a while, and tattoos!

24% – Eating Out
Friends: This includes eating out with family and anything outside of work
Coworkers: Eating out during work hours
Treat: Mostly Starbucks runs or anything for my sweet tooth aside from a full meal with friends
Convenience: Anytime I forgot to pack a lunch, or needed a snack on the go

4% – Clothing & Other Stuff
New purchases: This includes thrift shops, shoes, jewelry, etc
Dry cleaning: Includes car washes too, I figured my car falls under stuff maintenance
Repairs: I’m a big proponent of wearing out what I own rather than throwing it out

2% – House Misc
Decorating: Anything extra to redecorate or upgrade my house
Make-Up: Includes getting my eyebrows done and hair-cuts

After a year of faithfully tracking everything I am pleased with what I see and very grateful for the experience. My biggest expenses are in “Hobbies and Recreation” along with “Gifts”, that’s exactly what my Wants money is for! Happiness researchers Sonja Lyubomirksy and Joseph Chancellor point out that spending money on experiences brings about more happiness than buying stuff, and I completely agree1. The first few months I did this I felt uncomfortable with the amount I spent eating out, however, after a closer look I saw that I almost exclusively eat out in the company of others. I really enjoy cooking so I always take lunch to work, which means that when I do eat out it’s because I’ll be sharing a meal with someone, and not because of convenience. Eating with coworkers is not only fun, but it can also be good for my career since I often learn about things going on outside my department and potential opportunities. Eating with friends is extremely enjoyable, and as a single person it’s one of the few times I don’t eat alone. I often invite friends over for a meal at my house because like I mentioned earlier I love cooking, however, given traffic in Southern California it’s easier for us to meet halfway rather than one person trekking across traffic.

The experience of tracking my spending increased my trust in myself. I learned that I can be trusted with money, that I do not spend carelessly, that I can relax! For others, it may teach them that they spend too much on things they don’t enjoy or that they would like to focus their spending on bigger items. Regardless, tracking your spending for at least 30 days will be a very enlightening experience. If you feel uncomfortable around your spending knowing your patterns will shine a light on possible changes. I follow the Balanced Money Formula because it combats my natural tendency to hoard and deprive myself when it comes to spending money. I believe everyone needs to take a close look at themselves to see what their money style is and figure out a system that will enhance their life. From this experience I learned that I could comfortably afford a lot more extravagances, in fact, it’s changed my definition of what’s outside of my budget.

One of the extravagances I have always been curious about is having a personal trainer. I work out consistently, but only in gym classes or on the treadmill because I am very intimidated by strength training. I had considered getting a personal trainer, but I felt uncomfortable with the thought of paying someone for something I could potentially learn how to do on my own. However, after two years of going to the gym I have still not learned how to use any of the machines and have never stepped close to the bar bells. During this time my stamina and sleep have improved, plus I definitely benefit from the stress management of exercise, but maybe I could be more effective with my time at the gym.

I recently switched gyms and attended their complimentary personal training session. The cost of a personal trainer is comparable with the monthly fee of having a financial planner, and in fact, there are parallels between both professions. Financial planners and personal trainers are motivational coaches with specialized knowledge. Rather than expecting myself to be an expert at everything I can hire someone to teach me new skills and help keep me accountable. After a review of my Balanced Money Budget I’ve included the personal trainer annual cost by reducing the amount I save down to 36% of my net income. I am excited about learning from a personal trainer and deliberately spending money on an experience I thought I could never afford.