When I was first living in New York, I made a terrible mistake. I found a necklace that I wanted to get for my girlfriend, but it was too expensive. "I should save money," I thought. "This is the kind of spending that gets people in trouble." (It was a $1400 necklace and we had only been dating for a few months).
Here's where the mistake happened. Not only did I skip out on the necklace, but for some reason I thought it made sense to show my girlfriend the necklace that-could-have-been. She loved it (of course). "It's perfect" she said, "why didn't you get it?!"
She's right, I should have just bought the thing. Luckily, that girlfriend is now my wife, but every now and then she teases me about not getting her the "world's best necklace."
For someone who is pretty uninterested in material things (I'm writing this to you on a cracked laptop screen wearing a t-shirt that is 10 years old), the story of the unbought necklace might seem a little out of place. But it would have been a nice memory to have, especially since my feelings about my girlfriend (she's the one!) turned out to be right.
It's not like I didn't have the money. I just didn't want to spend the money.
Being in command of your finances is a funny balance when death could come today or decades from now. You want to maximize(happiness) in an uncertain world. So how do you do that? Spend money on the things that matter:
1. Pay yourself first. If you save 20% of your income with every paycheck and force yourself to cover your other expenses with the remainder, you'll go through a month or two of pain while you adjust and then have a lifetime of pleasure.
On the other hand, if you only think about saving as an afterthought, you might find yourself on life's worst treadmill: working far more years than you ever wanted to.
2. Know that one time costs are fine. Spending $1,000s on a great vacation that you will remember forever is ok. Spending $50 more than you make per month is not ok and is how people get into trouble quickly.
3. Realize life is short. Buffett has a great quote about balancing money: If you keep too much of it and never spend anything, "it's a little like saving sex for your old age." Waiting to take your kids to DisneyWorld until they're in high school? You might have missed something special. Not making time to see your grandparents before old age sets in? Same idea.
Accounting for the timing of money is an industry unto itself, but with a little bit of thinking you can identify the expenses that will lead to years of happiness. The question to ask yourself is: how much would you spend for one more great long term memory?
Here's where the mistake happened. Not only did I skip out on the necklace, but for some reason I thought it made sense to show my girlfriend the necklace that-could-have-been. She loved it (of course). "It's perfect" she said, "why didn't you get it?!"
She's right, I should have just bought the thing. Luckily, that girlfriend is now my wife, but every now and then she teases me about not getting her the "world's best necklace."
For someone who is pretty uninterested in material things (I'm writing this to you on a cracked laptop screen wearing a t-shirt that is 10 years old), the story of the unbought necklace might seem a little out of place. But it would have been a nice memory to have, especially since my feelings about my girlfriend (she's the one!) turned out to be right.
It's not like I didn't have the money. I just didn't want to spend the money.
Being in command of your finances is a funny balance when death could come today or decades from now. You want to maximize(happiness) in an uncertain world. So how do you do that? Spend money on the things that matter:
1. Pay yourself first. If you save 20% of your income with every paycheck and force yourself to cover your other expenses with the remainder, you'll go through a month or two of pain while you adjust and then have a lifetime of pleasure.
On the other hand, if you only think about saving as an afterthought, you might find yourself on life's worst treadmill: working far more years than you ever wanted to.
2. Know that one time costs are fine. Spending $1,000s on a great vacation that you will remember forever is ok. Spending $50 more than you make per month is not ok and is how people get into trouble quickly.
3. Realize life is short. Buffett has a great quote about balancing money: If you keep too much of it and never spend anything, "it's a little like saving sex for your old age." Waiting to take your kids to DisneyWorld until they're in high school? You might have missed something special. Not making time to see your grandparents before old age sets in? Same idea.
Accounting for the timing of money is an industry unto itself, but with a little bit of thinking you can identify the expenses that will lead to years of happiness. The question to ask yourself is: how much would you spend for one more great long term memory?