A lot of us who start on a journey to financial independence have a hard time balancing the saving vs. lifestyle aspect of it. Where do you draw the line when determining what expenses to cut? You want to save and not overspend, but you also don’t want to live trapped indoors eating canned beans and ramen noodles. Although I could probably do that for a while, it’s probably not appealing to most of us.
My wife and I have tossed thoughts back and forth on this topic. We had to get on the same page as to what was good to cut and what was overkill. This has been a very valuable experience as finances can be one of the most difficult aspects of a marriage to navigate.
I have come up with a system when determining whether something is worth spending the money on. It’s all about the money providing value in return. From there, I can spend wisely to the best of my ability, but here is how my system works.
The “Necessities”
This is an easy one. Water, power, housing, food – these things are definite necessities. The key question here is where to draw the line on how much to spend on these necessities. This takes a deep dive into your own values to determine that.
For instance, we have always spent more on food than most people as we view it as a means of preventative health care. We buy organic produce where possible and available, grass-fed meats, pastured eggs (or cage free if pastured is not available), etc. Basically the best we can get at a decent price (more bananas than kumquats). Whole foods, no sodas, things like that.
Although Trader Joe’s makes a delightful oreo-type of cookie that I simultaneously love and hate them for. Otherwise, whole foods, not processed.
So we accept that the grocery bill will be higher because it is personally valuable to us. Diet is one of the reasons our health has been in such great shape through the years and one of the reasons we are not suffering from the ailments others approaching 40 have. I believe mindset is another, so stay tuned for that.
When it comes to food, we draw the line at valuable vs. frivolous. Lobster or caviar, which neither of us like anyway, is not necessary and is therefore frivolous. It provides no extra value other than just being “fun” or “fancy”, so they are not regulars on our list. Organifi on the other hand, while somewhat pricey, provides great value in enhancing our health (read my review here). The health-enhancing or even healing properties provides tremendous value, so it is a regular on the list. So there you have it. Two food choices, both pricey, but one provides a fundamental value which the other does not. We happen to believe that the health value of foods like Organifi pay for themselves in reduced health care costs later on, but that again is a different article.
Housing can be put into the same category. We found a great place to live in a neighborhood with extremely low crime. There is no washer and dryer in our apartment, so the rent is a little lower because of that, but it is also a little higher because of the neighborhood. Safety and peace and quiet are very important to us. Much more so than financial independence, actually, so this one is an easy one too. Sign me up.
The Non-Necessities
This is probably the toughest area to figure. What might be a necessity to some might not be a necessity to others. For example, traveling might not be important to some people, so it makes sense to not do it so much. But others might get the jitters and the twitches if they go without traveling for more than a month or two. We’re all wired our own way for good reason sometimes.
So this too comes down to personal values. For me, the occasional getaway with my wife is more than a necessity. It not only gives us the opportunity to wind down a bit, but our vacations have also produced some of the most inspiring and creative ideas I’ve ever had. In fact, I need to bring a notepad or laptop with me because the ideas really start flowing. Don’t get me wrong, though. Sometimes we just goof around and that’s pretty awesome too.
But what if we didn’t take those trips? Sure, we may have a few extra bucks, but where would we be? And I mean physically, mentally, emotionally, spiritually, all of that. Would we be living in a spiritual or emotional wasteland? Sure, that sounds overly dramatic, but if I haven’t said it before, I’ll say it again. Life is lived between the ears. Choosing happiness has an impact that has a ripple effect not only on you but those around you. What is the value of that? the cost of hotel rooms, dining out and entertainment have all been more than worth it. Our vacations have paid for themselves more times over than I can count.
Beyond the rest and creativity they inspire, these vacations also provide maybe the most important thing – great memories. These are invaluable. You cannot put a price on them, therefore they take precedence in my mind over financial independence. If my “retirement” is put off by a year or so because of these trips, I am still happy for them. The smile on my wife’s face as we enjoy our time together is priceless. Which is also why we are after financial independence – for more of just that and less of the cubicles and fluorescent lights. It’s a balance for sure, but we need to grow and be happy on the way there.
Added Value vs. Empty Calories
Every spending decision for me comes down to a simple equation that is based on my personal values. Does this purchase add value to my life? For me, a new gadget or a fancier car is cheap fun that is expensive. So no go on that. But quality time and experiences with my wife – I’ll spend on that in a heartbeat. And because we’re both smart and responsible, we do it wisely without worrying about it.
For example. we still dine out from time to time. Usually no more than once a week on average because we have fun at home. (I addressed the easy savings aspects of dining out in my Three Pillars series.) Dining out provides us a different experience that is fun, gives us a break and allows us to focus on spending time with each other without the distractions of television, loading the dishwasher, etc.
And again, memories are important. Life is lived between the ears, so adding value there is even more important than adding value to your brokerage account. If you can do both, you’ve really got it going, and that is why we strike this balance.
Sometimes, it costs money to do things you love. That’s why we work and invest. Some great things can be free, like hiking or spending a day at the beach. But I also have a lot of great memories going out for ice cream with my family on those days at the beach and would not trade them if I didn’t have to.
You’re Going to be Okay!
At the end of the day, I believe in being responsible, but also taking the pressure off. You’re going to be okay. Whether or not you go out to eat, or stay at a hotel for a few days with your family and friends, is not going to break you because you are conscientious and you cannot run from your own conscientiousness. You started off responsible and will finish responsible.
So I do not like to preclude myself from life while also in pursuit of it. I’m going to continue to invest safely and aggressively while living a great life that works for us all the while. I may cut back from this system at times, but only when I’m inspired to do so and save extra money. That will boost my investments and supercharge my road to financial independence. And it will make me happy because I’m following my inspiration.
I’m trying to have my cake and eat it too, and you know what? It’s working!
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