Personal finance is just that. Personal. My choices and actions with money are not going to be the same as your choices and actions. Maybe I dream of travel and you dream of a Lamborghini. Maybe you want to pay for your kids’ college expenses and your neighbor wants a bigger house. Maybe you want to downsize to the point where you’re living in a cabin in the woods and your coworker wants to give all his money to charity. None of these dreams is wrong, they’re just different. The one thing we have in common, though, is a reason for our behavior. It may not seem rational to anyone but us, but that reason is what drives us to do what we do with money.
This is important because having a reason for what you do with your money is one of the keys to financial success. Too many people go through life without a clear reason for their financial actions. They take life as it comes, never really thinking about what they’re doing or why. They buy things because it seems like the thing to do at the time, or because their friends all have the same item. They invest in something because someone told them it was “hot,” or they buy a home because they were “supposed to.” They never give any thought to what they really want or need out of life and what they want their money to do for them.
It’s easy to fall into this way of life. It requires little thought and after a hard day at work, who wants to think about money and what to do with it? It’s easier to just go to the mall and buy the latest jeans from the Gap. It’s easier to give into peer pressure and buy that house than it is to do a personal inventory and decide, “I don’t want a house.” By the time many people figure out what they want their money to do, they’re in debt because they’ve indulged too many whims. Now they have to get out of all that old debt before they can really put their money to work on the important stuff. Had they taken the time to figure out their reasons for their actions, they might have saved themselves some trouble.
So do whatever you want with your money, but have a reason for doing it. This applies to big purchases as well as small ones. If you buy that candy bar from the vending machine, know that it’s because it will satisfy your hunger or craving in a way nothing else will at that moment. Don’t buy it, “Just because” or because you’re bored. If you’re going to invest in a mutual fund, know why you’re choosing that fund and what it will do for you. Don’t just pick a fund out of a magazine article or invest in what your friends tell you to. If you’re saving money in the bank, have a reason beyond, “I don’t know what else to do with it.” Is it for an emergency fund? A travel fund? A new car fund? If you’re going to blow money on an indulgence, know why you’re choosing to do that and what you will gain from it. Will it make you insanely happy? Is it something you’ve always wanted?
Having a reason for your financial choices gives you goals and a framework to work within, rather than just blindly saving or spending money and hoping it all works out. Your reasons may not make any sense to anyone else, and they probably won’t be the same as anyone else’s either. That’s okay. What matters is that your reasons work for you and take you where you want to go.
(Photo courtesy of Jason Dirks)