The financial independence community sometimes gets a bad rap for encouraging excessive saving at the expense of present day spending.
The reputation is not entirely undeserved.
I listened to a podcast once where the guest admitted to the folly of trying to replicate Trader Joe’s trail mix by buying each of the ingredients individually and mixing them himself.
I thought to myself, “This is what financial independence is about?”
That never sat right with me.
The podcast guest was happy enough to admit that the meager savings from making his own trail mix was not worth his time or energy. Still, if there was ever one aspect of the financial independence community that turned me off, it was advice like “make your own trail mix.”
He was not alone in promoting what I considered excessive frugality. The word “miser,” referring to someone extremely stingy with money, comes up regularly in criticisms of people pursuing financial independence at all costs.
To this day, I’ve never connected with the voices that promote extreme saving at the expense of present day convenience and fulfillment.
I’ve also come to learn that this type of personal finance advice doesn’t work for lawyers.
Advice like “make your own trail mix” doesn’t work for lawyers.
As lawyers, we invest a lot of time (and money) into our education and careers. It’s no secret that we work long, stressful hours. One of the tradeoffs for all the hours we put in is that we have the opportunity to earn high incomes.
Considering we work long hours and earn good money, advice like “make your own trail mix” isn’t very helpful. It’s not worth saving a few pennies in exchange for our limited free time when we could be doing the things that make us happy. When we’re not working, our time and energy should be better spent elsewhere, like being with our family, socializing with friends, or relaxing.
What I’ve learned teaching personal finance to lawyers is that we are generally not interested in saving every penny possible until we can quit our jobs. This makes sense to me. Putting that much constraint and pressure on ourselves does not sound like a fulfilling existence.
The lawyers that I work with know they need to save for retirement. At the same time, they want to use some of their hard-earned money for a better existence today.
That’s why I recommend that lawyers spend money in ways that increase happiness, convenience and time. One of the best ways to practice this type of intentional spending is to create a Budget After Thinking.
When you follow a Budget After Thinking, you give yourself permission to spend on things that make you happy today, while still achieving your long-term goals.
Personally, shopping at Costco is an example of spending money today that brings me happiness, convenience, and time.
What I learned about spending money by shopping at Costco.
This past Sunday afternoon, my wife and I took the kids to Costco. I was thinking about all this while we walked through the store loading up our two carts.
It was a nice family outing. We killed a couple of hours, the kids had fun, and we have food and supplies to last us for a month.
On average, we shop at Costco once per month. We get our staple items (toilet paper, ground beef, coffee, etc.) and always end up with a few things not on our shopping list. On this weekend’s trip, the kids talked their way into Kit Kat chocolate bunnies (didn’t even know they made those) and enough AA and AAA batteries to power an airplane.
The thing about shopping at Costco: no matter your best intentions walking into the store, the final bill is always big. Somehow, the cart always fills up. What a business!
Anyone who shops at Costco will instantly know what I’m talking about.
I’m no longer shocked or disappointed with the final bill. When my wife jokingly asks what the total is, my answer is always the same, “A lot.”
What I’ve learned is that despite spending a lot of money at Costco, I view this as money well spent. We usually pick up some fun items that are relatively inexpensive and make us and the kids happy. Plus, because we load up on essential items to get us through the month, we don’t spend much time or money each week at the grocery store.
Even though the final bill is always big, I view shopping at Costco as an example of intentionally spending money in a way that increases happiness, convenience, and time.
Which leads me to one of the most important money lessons I’ve ever learned:
Sometimes, you gotta spend the money.
Sometimes, you gotta spend the money.
Personal finance is not only about saving. Yes, saving is crucial to achieving our long-term goals. But, I don’t recommend that we save so dogmatically that we make ourselves miserable along the way.
As lawyers, we work hard and we work a lot. If all we did was save every penny we earned in hopes of quitting our jobs one day, we would quickly burnout.
Instead of making your own trail mix, remember this piece of advice:
Sometimes, you gotta spend the money.
Buy the direct flights.
Costco is only one such example of when it makes sense to spend the money. I spend a lot of money at Costco each visit. But, we enjoy our family outings and get most of the essential items we need for the month in one trip. That’s money well-spent on happiness, convenience and time.
If my goal was to save every penny possible, I wouldn’t feel the same way about Costco.
Not a Costco shopper? Here’s another recent example when I decided to just spend the money.
My brother-in-law’s wedding is in Scottsdale this fall. When I booked our flights, I could have saved real money by connecting in Denver or Los Angeles instead of flying direct to Phoenix. But, at what other cost?
Anyone ever flown across the country with young kids?
A four-hour flight with three young kids is hard enough. My wife has it especially tough with the baby on her lap the entire flight. By the time we land, it feels like we just worked out for 4 hours.
The last thing in the world that we need is to extend the adventure with a connecting flight, even if it saves real money. My priority is to arrive in Arizona feeling energized and excited to celebrate this once-in-a-lifetime event with my family.
Sometimes, you gotta spend the money.
Personal finance is tied to our emotions.
Humans are emotional creatures. Of course, we can rationally look at examples and charts and won’t dispute the long term magic of compound interest. At the same time, we have emotions and feelings that need to be tended to now.
At Think and Talk Money, we regularly explore how personal finance is tied to our emotions. There’s nothing wrong with admitting that in certain situations, the right choice is to spend the money.
Traveling is a good example of spending money to increase happiness. In fact, the happiness effect has been well-documented when it comes to traveling. People get a happiness boost in planning the trip, then taking the trip, and finally remembering all the fun things they did on the trip.
That’s why so many people “love to travel.” It brings them happiness before, during, and after the trip.
Personal finance is about how we spend money today, not just in the future.
Personal finance is not just about long term goals, like saving for retirement. Just as important, personal finance is about how we spend our money in the present.
It’s not realistic to expect people to put off all happiness until some unknown time in the future. It is realistic to make reasonable choices now to ensure a better future.
What might be a reasonable spending choice for one person may be totally unreasonable for someone else. That’s perfectly fine. Still, we all need to make those choices for ourselves.
What I’m suggesting is that if you’re spending most of your time each week at your job, like most of us lawyers do, shouldn’t we think about using some of the money we earn so we can elevate our present day lives?
The key is understanding what those things are, so we actually spend our money in pursuit of those things.
That’s the essence of what it means when I say, “s , you gotta spend the money.”
So, what’s a recent example of where you decided to spend the money?
Let us know in the comments below.