How to Spend Money Wisely and Enjoy Life

by TerriRexson

It's taken me a while to work out how to spend money wisely. I'll share my tips for making the most of your money, starting now.

Think about all the money you've ever earned or been given. Now look at your assets - your home, possessions and savings? How did you do? Would you spend the money differently with hindsight? Probably. There aren't many people who get it right.

You can't do anything about the past. But you can change how you spend your money from now on. You need to change how you think about money. In this article we'll take a look at how you can optimize the way you spend money so that you can make the most of it through your life.

The goal is to maximise living a fulfilling life rather than to minimize spending money. The approach I'll share with you is not about being extremely frugal (that only works for a minority) but about working out the attitude to money that will give you the best life.

Understanding Your Attitude to Money

You may think that being careful with money is boring. That people who are extremely frugal must live a life of deprivation. Well actually most people who are extremely frugal get a kick out of it, it matches their personality type. But if that's not your thing then being very frugal probably isn't the right path for you - it won't make you happy and you probably won't stick to it anyway. 

We have two small kids. We're very aware of how fast their childhood goes. So this isn't the time for maximizing our earnings by working longer hours - our time is more important. We're also very keen to ensure our future financial security so saving and investing are important. 

My approach isn't about being extremely frugal or working all hours to earn more money, that's not the life I want to live. I like nice stuff. But I also like free time and financial security. So I need to find the right balance. 

How Much is Something Worth To You?

The approach I take is thinking hard about what is important to me and my family and spending accordingly. People often find my spending patterns odd. My possessions are an odd mix of high end luxury and no name budget items. This isn't accidental, it reflects how much importance I place on the item and where I think value for money falls for me. 

For example, all the toiletries in the house are very inexpensive and I don't wear cosmetics. That's not an area where I personally think it makes sense to spend money so we minimize spending. But I have no problem spending money on products to protect my kids from the sun - that's important for their health. 

My crockery is over 15 years old and was very cheap when I bought it. I like the design. I guess I found a bargain here. On the other hand, my Dualit toaster was expensive, but worth it for the quality. Sometimes you need to pay extra for quality, sometimes the cheap item is just fine - telling the difference is a skill you need to develop. 

I prefer to buy quality clothing but less of it. My good quality winter boots are several years old and still in good condition. My Mum on the other hand gets bored of clothes very quickly and likes to follow fashion, she would rather buy lots of cheap clothing and change her wardrobe regularly. My goal is to just buy good quality clothing when something needs replacing. 

My kids spend hours and hours playing with LEGO. Although it can seem expensive for a small box of plastic bricks, when I think about the enjoyment and useful skills they will get from it, it's much better value that buying a lot of cheaper toys that won't get played with as much. But I do know kids who can't sit still long enough to play with LEGO, it wouldn't be a good choice for them. 

So everyone is unique. We all value various possessions and experiences differently. You need to develop a good understanding of what actually makes your life richer. 

Decide to Spend Money Wisely

Think about how you have spent money in the past. You probably didn't get it right. Do you have clothes that you have never worn? Have you spent a fortune on take out coffee? A gym membership that you don't use? That kitchen gadget that looked like a bargain but never really worked? Do you live in a bigger house or apartment than you need? 

How would your life be different if you had spent your money perfectly? OK, so you'll never be able to achieve perfection, but it does make you think. 

How about deciding that from now on you'll give conscious consideration to how you spend money? You'll make some mistakes along the way, but you can learn how to spend money wisely. 

Evaluate Your Possessions

To develop your instincts for spending money wisely, it's worth evaluating how you have spent money in the past. You can consider money spent on travel, eating out and other experiences, but probably the easiest approach is to look at your possessions. 

Go through each room of your house and find good purchases and bad purchases. See if you can spot patterns. Have you bought things that looked like a bargain at the time, but then decided you didn't actually like it? Do you buy things and then not use them? Do you have too many of the same thing? Have you bought poor quality items and then not used them because they weren't actually any good? Do you have expensive items that you only used a couple of times?

Do you have items that you love and use over and over again. Those are the kind of purchases you want to be making in the future. Do you have purchases that have actually saved you money like energy saving light bulbs or a vacuum bottle for work that stopped the take out coffee purchases?

Next Time You Buy Something ...

Next time you want to make a purchase, stop and think. Imagine you're looking back on your spending choices from a few years into the future. How will you evaluate your current purchase? 

Sometimes you can decide to do without an item altogether. Sometimes you'll decide that actually it makes more sense to buy a more expensive item that will last longer. Other times you'll realize that this is an area where you can save money. 

There's lots more that you can do to really get your finances under control, but spending your money so that maximizes what you get out of life is a good start. 

How to Spend Money Wisely: Understanding Total Cost of Ownership

The Next Article in this Series
If you want to learn how to spend money wisely then it's important to understand total cost of ownership. How much does stuff really cost?
Updated: 04/13/2012, TerriRexson
 
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Do you spend your money wisely?


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TerriRexson on 04/12/2012

Thanks guys. This is the sort of thing I wish I had been taught at school, instead of everyone having to figure it out. Some people never seem to get the hang of money and waste so much of it.

Guest on 04/12/2012

You explained this very well. I know in my case many times I buy a more expensive item because I know it will last longer. But there are other cases where I might buy something that's cheap just because I know I won't need it long, but it's useful for short period of time. So it all boils down to personal taste and personal need. I like how you explained all this.

gowriter on 04/12/2012

Very good article. I've had to learn over time what to invest in and what not to waste money on. Because of my size, a good pair of jeans is going to cost more, but they last for years. I'll spend the money on it. However, T-shits are a dime a dozen to me. I will spend money on decent shoes because I'm flat-footed. But you're right, it's amazing how much you make your money stretch. Dollar by dollar and penny by penny.

BrendaReeves on 04/12/2012

This is very wise advice Terri. My ex-husband worked two and three jobs and he was cheap to the point of mental illness. I've been evaluating my wardrobe. I'm not into clothes either, but have decided I need to buy a few good quality items that I'll have for a long time. I have feet problems so money is no object when buying good shoes.

Marie on 04/12/2012

It's something I've definitely improved on as I've got older! We economise on certain things like staple foods (tinned and dry foods which store for ages) but are happy to pay more for nice, fresh fruit. We tend to buy cheapish t-shirts because we found that expensive ones don't tend to last much longer anyway but we all buy good quality shoes which can be worn year after year. We are very frugal with day to day living and do a lot of things that are free or cheap like walks in the park, picnics and going to local events rather than far away. But then we like to save up our cash for luxury holidays when we can. It's learning what matters to you - either as an individual or as a family.

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