14 December, 2013

Smart Spending Part I: Invest

Every body knows how to spend money, but not everyone knows how to spend money in a smart way. The first thing to do is to stop buying things you don't need, and to invest in the things that you will get a lot of use out of. Spending money on things without thinking about it is not a good idea, when you don't have Scrooge-type wealth.

As a result of the consumerism and materialism that has bombarded society with increased intensity for decades, people have forgotten, or never learned how to save money to buy something good, instead spending less money on getting something right now. The mentality now is not to save money, but to spend money on all these "great" products out there, instead of thinking about the future, and making an investment in it. Make investments with your purchases, pieces that will last years, instead of days. Stop spending money on small (and large) frivolous and impulse purchases, that you can do without. Instead, spend more money on fewer, more valuable things, with good quality that will last for many years.

There are areas in your life where you can save money, and make an investment. For example, buying coffee multiple times a day costs you more money, than if you buy it from a store and make it at home yourself. Maybe you don't have a problem with coffee, but perhaps you have a problem with buying new shoes every season, or multiple pairs of shoes every season. Maybe you do this because a new trend has come out and you really like it and want to try it out, or the shoes you have  are worn out. If you need new shoes, whether for work, school, casual, or dressy, take your money and invest in a few classic, good quality pieces that will have you set for years to come. If you have already done this, then you really don't need any new shoes, so you can use that money for something else. A way to get around spending money frivolously is well demonstrated in the movie Confessions of a Shopaholic, when Rebecca asks herself "Do i need this?", and the answer of course is almost always, no. If you apply the same tactics you will feel liberated, and more in control about your spending habits, because you have learned to say no.

I know what you're thinking: "shoes that are $20, $50, $100, or even $400 are cheap, so why not?", "They are on sale, so why not?", and "It's a good deal." The truth is, buying all those cheap shoes and replacing them all the time adds up. All small purchases add up. For the coffee drinkers, if you spend $3 a day for a year on coffee, you've spent $1460 a year on coffee. With that money you could have:
  1. invested

  2. put toward a home

  3. saved for a rainy day

  4. saved for an item you need and will last for many years
Don't get sucked into the advertising, the marketing, and the beautiful products in the store. Unless you can afford to spend, spend, spend, it's better if you think to yourself "Do I need this?", then put the item back, and move on. The exception to this, would be if you see something that is an investment piece, and you would use it for years to come. The key to smart spending is to buy what you need, not all the things you might want.

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