The 3 Ways I Spend Money
Summary
- I categorize spending into three buckets: investment, commodity, and enjoyment.
- When investing, focus on maximizing returns; it's all about the math.
- For commodities, spend the least amount possible while meeting acceptable standards. It’s about being efficient with money on things like toilet paper.
- Enjoyment is about getting the most value from your spending, even if it’s not the best deal per dollar, like spending a bit more on a sweater you really want.
- Mixing up these categories can lead to unsatisfying purchases, like buying a house that isn’t a good investment or isn't one you truly like.
Video
How To Take Action
I would suggest implementing the three-bucket strategy for spending money. First, let's talk about investments. Here, focus on maximizing your returns. Look at the numbers and aim to get the best results for every dollar you invest. Research and learn to make smart investments, even if it means starting small.
For commodities, keep costs low without sacrificing quality. Buy only what you need and get the most cost-effective option. This is where you go for the store brand toilet paper or basic office supplies.
Now, when it comes to enjoyment, it's about satisfaction, not just cost. So, if you’re really eyeing that sweater because it makes you happy, it’s okay to spend a bit more. The goal is to feel fully satisfied with these purchases.
A good way of ensuring your spending aligns with your goals is to classify purchases as either an investment, a commodity, or for enjoyment before buying anything. This mindset helps avoid unsatisfying purchases, such as a house that doesn't suit your needs or a cheaper sweater that you didn’t really like.
Regularly review your expenses to see if they fit into the right categories. This way, you remain conscious of where your money is going and make adjustments as needed. This approach simplifies spending decisions and helps focus on what matters most to you.
