One Key to Personal Finances That Everyone Should Know
Scott and I recently had “the talk”. If you are not married then “the talk” usually implies a tense conversation of figuring out where the relationship is going. If you are a newlywed couple like us “the talk” usually implies babies or finance. In this case, it was personal finances.
Neither of us are exorbitant spenders to begin with, but getting married gave us the chance to re-evaluate how we are spending versus how we want to be spending.
Personal Finance 3 year ago
There was and still is, of course, the general cost of living expenses (insurance, rent, utilities, groceries, etc).
For Scott, anything above living expenses was spent on hobbies and eating out. As a dancer, he spent on new clothing, classes, traveling internationally to congresses, and bar tabs at said congresses. He had to foot the bill on equipment for other hobbies including rock climbing, airsoft, “ultralight” backpacking, and camping. As a single guy at the time, he ate out for almost every meal.
I was never much of a shopper (I get overwhelmed in large clothing stores), but I did spend on festivals, bar tabs, fancy food, and hobbies. I went to music festivals in Vegas, Baltimore, NYC, and Toronto, paying for hotels, bus rides, planes tickets, and cocktails. I went on regular road trips with the girls, bar hopping along Dewey beach, Nashville’s Main St. or Miami’s strip. Hobby expenses included yoga classes, gym memberships, and camping gear.
Personal Finances after the talk
After we got married and had “our talk”, a few things changed.
Unless you opt for an option like house sitting or volunteering for room and board (another article for another day), basic living expenses will never go away, so I’ll just skip over that.
For additional spending, paying off debt was moved to the top of our list. This was followed immediately by retirement savings and health insurance. The amount we allocated to food and bar tabs was drastically reduced, as was the amount spent on hobbies. Travel was given its own fund to ensure we always have finances set aside for our adventures and experiences. New categories were also added, namely house, baby, investing and emergency.
Discussing these things helped me to identify what the motivation was behind these changes.
One key secret to managing your personal finances
Where we allocate spending is directly correlated with the things we value.
May seem common sense, but when you take an honest look at where you are spending the most, sometimes it doesn’t quite line up with what you thought your core values were. Even as a single person, I still spent way more on things that admittedly weren’t that important to me.
By taking a closer look at the things we truly value, we were able to easily prioritize and restructure our finances as a couple.
What we value: Security
How it is reflected in spending: Don’t get me wrong. I quit a good paying job to move to Brazil alone for 6 months as a volunteer. I am not afraid to risk, but it is always a calculated risk. Prior to moving, I set aside an automatic payment into a Roth IRA, I also ensured that I had enough as an emergency fund. I value spontaneity, but I also value a sense of security.
Now being married, it is important that we invest in our future security. This includes saving for retirement, a home, and a potential family. It also means diversifying income into stocks, bonds, etc. I will continue to live in the present and enjoy life today, BUT I also will ensure that we set ourselves up for success in the future. Now it is just finding the right balance.
What we value: Time
How it is reflected in spending: For both Scott and myself, one of our biggest life annoyances is a long commute. Driving 20 minutes to a metro, to sit on the train for 45 minutes, to then walk another 20 minutes to work…twice a day. That just amounts to loads of stress and loads of time. Because we value how we spend our time, we decided to allocate more spending on an apartment closer to our work. I work from home now, and Scott works directly across the street from his office.
What we value: Family
How it is reflected in spending: We both had a good education and it was largely in part because of our families that set us up properly. My parents paid for my first two years of college, and I paid for the second two. I think that was a wise decision on their part to teach me financial responsibility. They also took my sister and me on trips to California every other year to visit my grandparents and cousins. Cross-continental plane tickets for a family of four do not come cheap, but they took it upon themselves in order to instill within us an appreciation for family. We want to set our kids up for success and that means setting up an account for future generations.
What we value: Experiences
How it is reflected in spending: I don’t buy into the commercialization of products. It just doesn’t make sense to me that I have to buy skinny jeans because they are “in”, but then I definitely can’t wear them next year because they will be “dated”. I then will have to buy the faded flares or whatever. I just don’t care. I can do a better job at keeping clothing out of the landfill than I can keeping up with changing fads. Therefore I don’t spend much on new clothing or accessories. Instead, I shop at the Salvation Army, Oxfam, or some other second-hand store where a percentage of the proceeds go to communities in need. At the same time, I can give a second life to other-wise perfect clothes that would be sent to the landfill.
Rather than spending money on these “things”, I prefer to spend on experiences including travel, hobbies, festivals, adventure sports, etc. Experiences give us life lessons and memories to look back on. At the end of our lives, those memories are the only things we are left with.
What we value: Giving back
How it is reflected in spending: With a global population exceeding 7 billion people, I could have been born into any family, in any country, under any set of circumstances. In a world of great inequality, I drew the lucky card. I was born into a position that allowed me to discover myself and that granted me the freedom to pursue my passion. I refuse to take these gifts for granted and have taken personal responsibility to use the knowledge, experience and talents life has given me for a cause greater than myself. As Chris Guillebeau says in his book “The Art of Non-Conformity” “It’s not about guilt; it’s about gratitude.”
Some people give back in the form of tithes (committing 10% of income to the church), I give back by committing at least 10% of my time to volunteer work. Over the past 10 years, I have served in volunteer roles with foodbanks, shelters, refugee services, and other community programs.
We allocate money to things we see value in. We don’t pay for things that we don’t see value in.
As an individual, I don’t value the freedom of having my own car because Scott and I already go everywhere together. (Really, we are attached to the hip.) Therefore, we just share one vehicle for the time being. I don’t value having the most current fashion trends, so I second-hand shop. I don’t value having the perfect espresso drink every day, so my thrift store coffee pot gets plenty of use.
As a couple, while we still enjoy a nice Michelin star meal every now and then, we do not value the need to splurge every month like we used to. While we value social outings with friends, there are other values that now take precedence over running a $300 bar tab every single time. With a little creativity, there are other social outlets which do not cost as much or are even free.
Values are completely personal and what we value as a couple may not be of any interest to you. However, this is an easy starting point for anyone ready to evaluate their own values and reorganize their spending. Hope you found this useful!