Your money guy or gal shouldn’t just talk to you about saving more and investing better.
They should also talk to you about spending wisely, because that’s a huge part of getting the most out of your money.
And that’s really what this is all about. Money is just paper. Or more and more, just numbers on a screen. That paper, those numbers, don’t matter unless you’re using them to achieve your goals and improve your quality of life and live the way you want to live.
What that means in practice depends a lot on your goals, values, and preferences, but it typically has five different flavours:
1. How best to save with specific spending goals in mind (a car, a home, a college or university education, retirement, and so on)
2. The best way to go about paying for various things (saving in advance, paying annually rather than monthly, using cash value life insurance, and so on)
3. How to manage your cash flow to reduce stress, reach your goals, and get the most out of each dollar you earn
4. Where to withdraw money to fund purchases (both during your earning years and in retirement, usually with tax considerations in mind)
5. What to spend your money on to bring you the most value and improve your quality of life (usually this involves a lot of conversation and trial and error, but examples are like spending more on your health, investing in yourself, spending more in retirement or giving an inheritance early, how best to help your kids, charitable giving and so on)
Traditionally, there’s been a lot more focus on saving and investing for a few reasons. Most obviously, most people have a harder time saving than they do spending. But also because lots of advisors actually just want to be portfolio managers and are far more focused on the amount you have invested with them than anything else.
I don’t believe in playing that game because it misses the whole point of what we’re trying to do.
Money isn’t an abstract number, it’s not points on a scoreboard, and you don’t get a prize for dying with the biggest number.
Money is a practical thing. A means to an end. And you only get to that end by spending your money thoughtfully. That’s where a big part of my focus is these days because I think there’s a lot of room for improvement.