The Only Three Questions That Matter When Making Money Decisions
Why a penny saved isn't always a penny earned
When I was growing up, both of my parents were cheap and proud of it (hi Mom and Dad, I love you!). Mom would clip coupons, purchase her clothes at outlet stores, and comparison shop, going so far as to return an item if she found a better deal at another place. Dad would buy the store brand over the name brand, worry aloud over the cost of purchases, and would never pay someone to do something he could do himself.
Though my sisters and I sometimes found their behavior quirky, if not embarrassing, their persistence paid off (no pun intended). Mom taught us about credit by keeping a log of any money she’d loaned us and making us pay her back. Dad showed us the value of hard work by paying us a small allowance for doing chores. By a combination of love and luck, all four of us were able to purchase our own homes by our early 20s and are comfortable making choices about our spending and credit.
Yet, like all life lessons imparted by parents, I had to take what I’d learned and separate what benefited me from what burdened me. I concluded there are only three questions that matter when making money decisions:
Does this purchase or investment align with my values?
When I think about the impact my purchases make on the world and other people, am I satisfied with the result? This includes the impact on your relationship if you and your partner are spending as a couple.
Does this purchase or investment align with my goals?
When I think about the impact my purchases make on my future self, am I satisfied with the result? Sometimes immediate satisfaction is more important, other times long-term goals are worth a short-term sacrifice.
Is the amount I'm spending equivalent to what I'm receiving?
Equivalency, in this case, includes emotional as well as market value. Buying $100 of organic food may bring you an equal amount of satisfaction to donating $200 to a favorite charity.
I struggled with this concept at first. Until early adulthood, any time I purchased an item of clothing or at at a restaurant, I’d feel guilty about “wasting” my money. It was only once I began working in the financial industry and gained an intimate view of other people’s money habits that I was able to put my own into perspective. I realized there is no single, right answer to these questions. How much you spend, and on what, is one of the most personal and important decisions a person makes.
As a financial planner, my goal is to be like my parents and instill in you the tools needed to make informed decisions about your money without bias. Because at the end of the day, money is only worth the joy it brings you, and joy looks different for everyone.