I had a conversation with friends on vacation earlier this year and the subject of money was raised a few times. One interesting money subject we discussed was where and how we spend our money. I’m of the opinion that if we want to take good care of our finances, we must take responsibility for what we spend our money on. My thinking is nobody really wants you to save money. Well, maybe the bank.
Like Carl Richards nicely explained in his recent book The One-Page Financial Plan budgeting is beyond numbers, it could be considered an awareness exercise. Taking this approach budgeting can be used to reflect upon what you value in life. More specifically what you value spending your money on.
I recently took at look at our budget and this is where our money goes every month. Here are some reflections:
- We pay ourselves first every month with automatic RRSP contributions. We invest in low-cost indexed products inside our RRSPs so I can conclude from this we are mindful of investing fees while making our financial future a priority.
- We pay our mortgage but we also make lump sum payments on our mortgage. I can conclude we don’t like debt and we want out of it.
- We put away a small amount of funds every month for home improvements. I can conclude we don’t want to incur any new debt for these projects.
- We try and max out our Tax Free Savings Accounts (TFSAs) every year. Doing so will provide us with more financial flexibility as the dividend income rises. We maxed out these accounts earlier this year but with the 2015 budget announcement, and $4,500 in TFSA contribution room available to each account we own, we’ll be looking at ways to max out our contribution room again later this year and into 2016.
- We are making a car payment on a 3-year-old vehicle but we also own a 15-year-old car. I can conclude we don’t value fancy cars (at least right now).
- We put away some money for travel every year. Travel experiences, locally or afar are very important to us.
- After RRSP contributions, extra mortgage payments, TFSA contributions, savings put aside to improve our home and for travel, there is really nothing leftover.
These bullets lead me to this – we can’t afford to do many other things. I’ve said a few times to folks over the years “I can’t afford it” or “we can’t afford it” but that doesn’t necessarily mean I/we couldn’t pay for other things if we wanted to. What it means is we put a higher value on certain things in our life. I don’t see this is as a bad thing but I can appreciate other people might not feel the same and that’s OK by me.
I’ve always thought budgeting is a good exercise because it reminds us about what we value when we spend our money. After all, life comes down to choices. Your choices are a reflection of what you value. Trying to stay true to what you value is not taboo.
Image with blogpost courtesy of Carl Richards – The Behavior Gap.
What’s your take? Do you see a link between what you value and what you spend your money on? Share your story.