Spending Smarter Without Losing Your Life: A Practical Guide to Better Money Choices

Money is one of these topics, the discussion of which is considered pretty personal. Freedom, security, identity, comfort - these and many other values ​​can be associated with money, which is why advice on saving and spending is not always welcome. This article is intentionally devoid of dogma and preaching; it does not force the reader to break bad habits and suffer for their sins. It focuses on getting a complete picture and performing deliberate spending rather than random expenditures due to some habits or marketing pressure.

Most importantly, when it comes to money, one has to understand that time is more valuable than money, and money spent should bring as much pleasure as possible. Tips on how to start spending wisely include advice to spend less than you earn, pay yourself first, and buy things with a higher ratio of benefits to costs.

Many lessons on the topic of saving and spending are based on a small set of recommendations that have proven their effectiveness. These include the principle of living within one’s means, paying attention to the actual value of things, and eliminating unproductive expenditures. Most importantly, one should pay oneself first, that is, put aside money for savings or investments before making any purchases or withdrawing money from an account.

The principle of living within one’s income is an obvious truth, the understanding of which can be built through examples. The fact that two people have the same income but different financial situations can affect their ability to pay off mortgages or take loans in the future. The point is not to set a standard for earnings relative to expenditures but to ensure that the balance is positive. To do this, it helps to use the method of paying yourself first. It consists in withdrawing a fixed amount for investments and savings first, after which one spends the remaining money on expenditures.

A small historical digression is necessary to explain the details of this method. It was first described in a series of booklets published by a Denver publisher named George Clason in the 1920s. Written in the form of parables, they were addressed to the bank director and served as advice for his clients. They were later compiled into the book The Richest Man in Babylon and were highly successful. The book taught people to pay themselves first and to invest at least ten percent of their income in the stock market.

The principle of value over costs is another fundamental truth in the relationship between people and money. Value is different from costs because it extends beyond an initial value. Everything that involves additional expenses must be considered for the total cost of goods or services. A useful example that helps understand the importance of this approach is the car. According to the AAA’s Your Driving Costs study, the average cost of car ownership is about 11660 dollars per year or 965 dollars per month. The main expense, which is also the largest expenditure for people who buy a car, is depreciation, which averages 4300 dollars per year.

On the surface, this may seem like a relatively low price for the car, given the various expenses related to maintaining it. However, it is important to compare this figure with the amount that people spend on gasoline or tires, which is about 3100 on average per year. Thus, when considering the total annual cost of purchasing a car, a person must pay attention to all expenses that affect the cost of the vehicle. The same considerations can be applied to smaller purchases when comparing, for instance, the cost of an inexpensive television that breaks down every three years with more expensive but more reliable models.

Many people fall under the spell of brands, believing that they are paying extra for the image, which is partially true. The value of brands is measured by the impact they have on the population; consequently, the entire marketing budget is spent to encourage as many people as possible to buy a product under the brand’s umbrella. The difference between branded and generic products is significant enough to be taken into account when calculating expenses. According to research conducted recently, comparing more than 170 products from big supermarkets, store-brand analogs have significant advantages over branded products. On average, their prices are 30–70% lower, which is especially noticeable in dairy products, cereals, and frozen foods. Store-brand products save more than 40 billion a year for the whole country.

While the difference in quality remains the reason to choose one or the other, it is essential to conider this “brand tax” when making purchases. Not all store-brand products are significantly inferior to branded ones; on the contrary, many are produced on the same assembly lines as their famous counterparts. It is crucial to pay attention to the goods for which no marketing campaign is being made; it is these products that hide their qualities the best. It is necessary to distinguish between brands that are genuinely superior in performance and those that only seem to be better due to marketing.

As mentioned earlier, online shopping removes many of the obstacles that a person faces when shopping in traditional ways. However, the absence of cash transactions and the ability to hold goods without effort removes many barriers, increasing the ease of the purchase. Therefore, shopping online, while potentially beneficial, requires special attention to the fine print. Hidden costs like shipping fees or return conditions in narrow windows can eliminate many of the advantages that e-commerce offers. Review sites can also be misleading because they do not always reflect reality. According to the FTC, fake reviews, including those written by artificial intelligence, cannot be created as of 2024, and offenders may face fines of more than 50 000 dollars per review.

However, the mere existence of this rule indicates the extent of the problem, which implies that one should never take reviews at face value. Although the ability to check reviews on multiple platforms helps identify fraud, using caution when encountering universally positive comments is advised. This issue will eventually resolve itself as rules are enforced and review sites update their rules.

People frequently decide not to complain about a product or service despite being promised something different than they received. One reason for this might be a consumer’s reluctance to return goods, whether due to a sense of futility or the hassle of the procedure itself. In any case, businesses use such behavioral patterns to encourage customer loyalty. When purchasing products, one should be aware that documentation is more important than proof of receipt of goods in satisfactory condition.

Companies that expect to see their customers again pay much more attention to returns and refunds, making the process as convenient as possible. Thus, it is essential to contact such organizations first, after which one may have the opportunity to improve the situation. A phone call to the company’s customer service and a letter to the company’s management are usually enough to find a solution. If these actions fail, other measures such as disputing the transaction via card or calling the local consumer protection agency may be necessary. In extreme cases, and mainly for large purchases, a lawsuit can be filed in court, which includes the option of a small claims court.

The idea of ​​reducing unnecessary expenses does not imply that all areas of spending should be reduced by the same amount. On the contrary, there are some expenditures that can be canceled entirely, while others, although expensive, are vital and should not be touched. It is necessary to pay attention to which services or purchases are made due to habitual trust to the provider. Subscriptions and regular orders that renew automatically are examples of such expenses, and checking their balance on a regular basis helps free up funds for more critical needs.

The Power of Margin

All the methods listed above, as well as the examples that demonstrate them, ultimately affect one simple principle – the margin. Margin implies a person’s ability to work or spend money within limits, thus creating conditions for leisure, comfort, and other requirements. A small amount of savings, which is obtained when expenses are balanced against income, is the basis for financial security, which allows one to have more opportunities in life. Margins are beneficial in terms of reducing the burden associated with the necessity to work. A person, knowing that they have a financial cushion, is much less scared to change their life, pursue new goals, take risks, and compete. Margin creates opportunities, and when it comes to money, it is the foundation of a great many things in life. It is essential to pay attention to the margins in everyday life and in the work and make sure that expenditures are justified. This will allow one to see the bigger picture and spend money not in a random way but with purpose, which is ultimately what spending is all about.