How To Spend Money Wisely

How to Spend Money on Only Things That Will Make You Happy

Updated on Nov 02 2018

Learning how to spend money on things that make you happy long-term is smart money-management. These top tips on how to spend money wisely will help you not only set better financial goals, but will also help you achieve a better financial future.

Life is all about making decisions that will impact your future. If you buy a latte every day, is it worth the price justification of $3.50 or so to cost $1,278.00 at the end of the year? Even little expenses add up, which is why excessive spending that feeds your wants may be costing you happiness in the long-run.

For example, there is a difference between pleasure, or immediate gratification with a dopamine high, and happiness, or overall contentment and bliss. Understanding the difference between pleasure and happiness and spending your money on what really makes you happy long-term may be the key.

Deciphering the Difference Between Pleasure and Happiness

Over our lifetime, millions of dollars flow through our households, yet it’s challenging to funnel those funds into investment accounts when so many things grab our attention.

Entrepreneur and thought leader Seth Godin wrote in an article titled “The Pleasure/ Happiness Gap” that there is a distinct difference between pleasure and happiness. He notes:

“Pleasure is short-term, addictive and selfish. It’s taken, not given. It works on dopamine. Happiness is long-term, additive and generous. It’s giving, not taking. It works on serotonin.”

It’s important to figure out what money-spending actions make you happy and benefit your future, which should inform your goal setting, budgeting and overall financial plan. Here are a few tips to getting on the right track:

1. Consider What Makes You Happy

You work hard your entire life so you should be able to enjoy your retirement years. It’s important to remember that you won’t be able to do this unless you have the money you need to not only maintain your lifestyle, but also splurge on entertainment, travels and socialization with friends and family.

The challenge with retirement planning is that it’s a long-term process. In order to achieve the magic of compound interest you need to invest and strategically grow your net worth years in advance; which means you have to be careful how you’re spending your money.

Godin discusses:

“Marketers usually sell pleasure … On the other hand, happiness is something that’s difficult to purchase. It requires more patience, more planning, and more confidence. It’s possible to find happiness in the unhurried child’s view of the world, but we’re more likely to find it with a mature, mindful series of choices, most of which have to do with seeking out connection and generosity and avoiding the short-term dopamine hits of marketed pleasure.”

Take control of your finances by assessing what is important to you and your future success.

2. Set Financial Goals

A financial assessment is a set of questions to help you determine whether you’re financially on track to reach your future monetary goals. The assessment can be done with a financial planner or in the form of an online questionnaire. The purpose of the assessment is to understand where you stand today, and where you want to be in the future, so that you can get accurate recommendations for how best to achieve your retirement goals. Learn more about how to set financial goals that are right for your unique situation.

3. Track Your Spending and Create an Informed Budget

Track your spending and income to get an accurate picture of your financial situation. Save receipts or write down your purchases in a notebook as you make them. Review your bills each month and add those expenses to your budget.

  • Organize your purchases by category, such as food, clothing, entertainment, etc.). Categories with the highest monthly amounts are a good place to start saving money.
  • Create a weekly or monthly budget for each category. Make sure the total budget is smaller than your income for that period, with enough leftover for savings.
  • Avoid impulse or expensive brand-name purchases to help you stay on track with your budget and goal setting.
  • Avoid eating out at a restaurant or at fast food by creating grocery shopping lists to cook healthier meals at home.
  • Only purchase what you actually need so that you’re not shrinking your savings with unnecessary purchases.
  • Do your research to buy items that are on sale or are a good price, and read consumer reports to learn what items will last the longest and meet your needs best.

There are handy financial apps to help you easily track your expenses by category.

Spend Money Wisely to Build a Comfortable Retirement Nest Egg

Think it’s too late to save for retirement? Think again. Connect with an expert financial advisor to gain control of your finances and help you devise a retirement plan that will help you build a financial future that makes you proud.

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