As we go through our daily lives, there are many decisions to make. Should I have coffee or tea today? Should I vote for Obama or McCain? Do I turn left or turn right at the intersection? Should I invest a portion of my earnings or should I use a portion of my earnings on entertainment?
The choices that we make affect our lives. However, while some of our choices affect us temporarily, many of them affect us for an extended period of time. The choice between coffee or tea may not have as dramatic of an effect on our lives, as our choice of the next president. Likewise our choice of direction at the intersection can have a temporary impact, while our decisions regarding our finances can affect us for a lifetime.
The difficult choices how we spend our money are experienced by everyone from teenagers with new summer jobs, to an executive who needs to trim the payroll. The question is simply, “WHAT, DO I SPEND MY MONEY ON?”
In order to make this difficult decision we have to prioritize what is most important to us. If you are one who lives for now then certainly saving for a “rainy day” is not high on your priority list. If you are one to “save for a rainy day” then investing in a vehicle that has a reasonable return is probably not too high on your list either. Maybe you are looking for a “good investment” then entertainment or other self-indulging activities would not find their place on the top portion of your list.
Before we can make wise decisions with our money we must first acknowledge our philosophy on spending. What motivates you to spend money? Are you merely spending more than you are investing? If so why is that the case? What was your family’s philosophy on spending and investing?
Make a list of your spending or investing practices for the past three months. Be honest about the amounts, where does the major portion of your spending lie? Is it in entertainment such as dining, clothing and other miscellaneous items? Is it in sound investing such as your education, real estate, your business or retirement? Is your spending mostly to pay off debt from entertainment items? When you discover your philosophy on spending you will be able to make wiser choices.