The Formula For The Best Money I’ve Ever Spent
Over the course of my life, I’ve made tens of thousands of spending choices. Some I regretted, while others changed my life forever. Some purchases had a significantly high impact in shaping my life while others produced little (or negative) impact on my well being. Some purchases I regret while some I regret not spending more! While we all spend money, some spend money in a way that gets them the highest “return on life” (how much a purchase improves your life) while others watch their money slip away each month without any notable impact to speak of. While we must pay for basic necessities (rent, food, etc) and save for the future (retirement, a home, etc), what about our spending beyond that? How can we spend our money in a way that nets us the highest “return on life” so we don’t watch our hard earned dollars just slip away?
Today, I want to share a special formula I use to do just that and it has led to some of the best purchases I’ve ever made. I also share a story of a time I spent $3,000+ on someone I love and it was some of the best money I’ve ever spent. But first, it’s important to understand the subtle nuances between “low impact” vs “high impact” spending.
High Impact Spending vs Low Impact Spending
What we spend our money on should be a reflection of our values (the things that matter most to us) and our priorities (what we value from most to least important). Nobody has a right to judge what you spend on because nobody shares the exact same values and priorities you do!
There is no “right” or “wrong” to what you spend your money on. If you want to spend $1,000 on Pokémon trading cards as a 40 year old, don’t be embarrassed about it, own it! If it’s something you truly value then find a way to make it happen. I’d rather be a 40 year old buying Pokémon trading cards I’m passionate about (spending on my values) than spend money on some fancy car to impress my coworkers (spending on others values).
Bottom Line: You worked hard for your money to spend it on your values, not theirs. Seems obvious, but knowing better & doing better aren’t always aligned.
Not all spending is created equally, there are two types to be aware of (below). One type gets you a low “return on life” while the other could leave you with memories you’ll take to the grave. You have a limited amount of money to spend, how impactful will you choose to make it?
Frivolous Spending (AKA “"Low Impact” Spending)
“We buy things we don’t need, with money we don’t have, to impress people we don’t like” - Fight Club
Frivolous spending is spending that doesn’t match our values & priorities. Therefore, only you can truly determine what is “Frivolous” since nobody knows your values like you do. It can look like the quote above where we spend money on other people’s values (perhaps seeking self worth or social approval we never had as children?… as one example). It can also show up as lazy habits, convenience spending, etc. None of these are bad, unless of course they are holding you back from spending on values that are more important to you (i.e. world travel, new home, etc).
Let’s stop there for right now. The last thing I want is for you to go into a “calorie counting” type frenzy of every little Starbucks coffee you spend money on. For most, it will likely lead to a penny wise pound foolish cycle of self beat up. As a financial adviser, I want you to focus only on what you say “YES” to, then saying NO to the other things is easier. Moving on…
Meaningful Spending (AKA “High Impact” Spending)
Meaningful spending is spending that matches our values and priorities. THIS is the type of spending I love to see my clients do, the type of spending you should say “Hell Yes” to. This spending could be anything from world travel to paying mortgage & utilities for a home that brings you joy (or at the least gives you a roof over your head). While meaningful spending can take many forms, I want to share a formula that is a surefire way to achieve it.
My Favorite Formula for “Meaningful Spending”
Meaningful Spending = People You Love + Experiences
Some of the best money I’ve ever spent came in 2017 when I spent 2 weeks exploring the Peruvian Amazon jungle with my Dad. I will take those memories to the grave. My parents don’t have much so I had to cover the full cost for both my Dad and I (flights & all). Several thousand dollars later and all I can say is… it was SO WORTH IT. Every time I see my Dad, we reminisce on those special memories together and both look back on the photos often. When opportunities come up to share an experience with people I love, the price tag becomes less relevant than ever. We grew closer from that trip than ever before and now we have these special memories together that will last a lifetime. At the time, the upfront cost of the trip was stressing me out. In hindsight, that was some of the best money I’ve ever spent (and I wish I had spent more!). Meaningful spending for you can look completely different. It can be as simple as grabbing brunch every Saturday morning with a certain best friend, partner, or family member.
Other “Meaningful Spending” ideas might be:
Epic long distance treks with a close friend
Romantic Road Trips with your significant other
Support powerful causes with your time and money alongside loved ones who also care for those causes
Spend a week or two traveling a foreign country with one (or both) of your parents
Host a monthly dinner night for friends and family
Ultimately, any activity that allows you to indulge in new experiences and share that moment with the people you love will be one of the most powerful ways you can spend your money with meaning.
Based off this formula, what are some ways you can spend more meaningfully in 2022?
What A Financial Planner Can & Cannot Do To Help
A Financial Planner CANNOT:
Determine what is “frivolous” vs “meaningful” spending for you. You are the best judge of that as you know your values/priorities better than anyone.
Read your mind. Take time to reflect on what really matters to you so you can communicate it clearly to an adviser (otherwise it’s garbage in, garbage out). If you’re not entirely sure what your financial priorities are, an adviser can collaboratively think through them with you before we must ultimately make a best efforts assumption (you have to start somewhere and we can always switch gears later if need be).
A Financial Planner CAN:
Ask powerful questions to explore what “meaningful spending” is for you and prioritize more of it in your financial plan.
Create a financial plan that reflects your values/priorities and gives guidance on what is practical to spend on each priority.
Offer accountability to help ensure you spend your money more meaningfully. You share your values with an adviser, if the adviser sees behavior that doesn’t align with those values, it’s their job to mention it to help keep you on track.
Don’t let your hard earned money slip away with frivolous spending. Use your hard earned dollars to create memories with people you love, spend your money in a way that delivers a high impact on your life. Spend on your values, not on the values of others. Spending wise, prioritizing the things that are most meaningful to you first makes it easier to say NO to the rest. If spending “meaningfully” continues to be a challenge for you, consider reaching out to a CFP® professional to help you start spending your hard earned money more wisely and intentionally.
For those wondering… the thumbnail photo for this post is my Dad and I with a baby sloth we found while wandering through the Amazon jungle together. We walked up and saw this fizzy ball, once we got closer he unraveled like you see in the photo. It was such a cool experience!
San Diego Financial Advisor | Fee-only Fiduciary
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