Anyways, this friend was thinking about checking out this flashy new Michelin Star restaurant that just opened. She was excitedly telling me about her plans, but abruptly stopped herself and said, “But you probably wouldn’t approve.”
I was a little taken aback. Why wouldn’t I approve? “Because you’re all about saving money and personal finance,” she retorted.
And then it struck me: Most people believe that “personal finance” and “spending money” are polar opposites. This couldn’t be further from the truth – I’ll tell you exactly why following a personal finance system means you can spend on what you love (and no, you don’t have to wait till you’re all white-haired and wrinkly).
The Toilet Paper Thief vs The Guy Who Spends On What He Loves
Let’s compare 2 friends – we’ll call them Mike and Paul. Mike is your typical frugal saver. He doesn’t have a personal finance system but he tries his best to save more. He cooks ramen at home to save money. He takes the bus instead of the subway so he can cut 10 cents per day on his trip to the office. He wears the same pair of jeans every time he goes out. When he goes travelling, he steals the toilet paper and soap from the hostels. He picks up 5-cent coins from the ground.
Paul doesn’t scrimp as much as Mike does. In fact, he spends on what he loves. Paul manages to do this because he has a kickass personal finance system: He’s automatically saving and investing pre-determined amounts every month. He’s automated his credit card and phone bills so he never has to worry about missing a payment. He’s set aside “Big Play” money for parties and vacations.
Once all that is done, Paul has a few hundred dollars left over each month which he can spend on the things he loves, no matter how much they cost: Clothes, meals, drinks, massages – in short, everything that makes it awesome to be young.
Paul doesn’t break a sweat if his cash runs out before the end of the month. He simply stays home, cooks, and reads a free book to pass the weekend. In a couple of days, he’ll receive his next monthly salary, automatically save/invest/pay off his bills, and with the amount of money left over, continue spending on the things he loves.
Who do you think leads a richer life?
Old Psychology vs New Psychology
Most people assume that just because I write about saving and investing, I’m one of those crotchey old personal finance dudes, hobbling around with a gin and tonic in one hand, nagging people to stop spending money. That’s the old psychology of spending money, the one that most clueless people mistakenly follow.
There’s a new psychology of spending money: If you’re faithfully following a personal finance system, you’re allowed to spend on anything you want with the money left over.
In the past 2 months, I’ve had a $325 dinner, went on a $3,505 vacation, bought a new Amazon Kindle, and last night, I paid as much as $14 for a beer (that last one was totally not worth it). I did all of the above absolutely guilt-free, because I’ve built, and followed, a personal finance system that takes care of my saving, investing and payments.
There’s a key difference between the following two statements:
Crotchy Personal Finance Dudes (like Mike): “I will never ever spend on a $200 dinner”
People who read Cheerfulegg.com (like Paul): “I’ll totally spend on a $200 dinner, as long as I can afford it after I’ve saved and invested.”
Which person would you rather be?