Every Spending is an Investment

We all like to spend money. Let’s admit it. It’s such an enjoyable experience to fork over the green paper for the things that we have always wanted, whatever it may be. Sometimes with saliva dripping out.

If I know when exactly I’m gonna die, I’ll probably time it exactly when to quit my job with enough savings, then use that money optimally on the remaining days, and then make sure to spend the last dime I have on the last day of my life. Heck, a better idea would be to take out the largest permitted amount of loan when death is around the corner (one that will cancel upon death).

Unfortunatley we don’t know when we will die. Rather sad.

Precisely because of that, the fever is ignited around personal finance blogsphere to talk about saving, budget, and retirement. From those topics, frugality is often talked about, a term for which I define as finding ways to spend money efficiently. A side effect could be the fact that some of us may become borderline-cheap, or worse yet, plain-cheap. So cheap that once it took me forever to decide to buy a simple blender.

It is important to find a way to balance between spending and saving. One helpful way of thinking is to treat every spending like an investment. In fact, I’d take out the word “like” and say that every spending is an investment.

There are so many parameters involved in life – happiness, comfort, convenience, family, stress-level, health, financial security… The list goes on and on and they are all inter-related, which makes finding a balance extra important. Now imagine that in each unit of time, each of those parameter becomes an individual stock. Now we have a stock market. We can pick which stocks and whether to invest short-term or long-term. You decide!

As such, I’d say I’ll splurge on Starbucks at lunch sometimes, despite I do have a mini-coffee-machine in office. And yes, I did read about the latte effect, and in fact, way too many times because everyone talks about it on their blogs. Currently, I switch in between Starbucks and making my own coffee. Why? I work hard to make money, and I’m ready to spend it to enjoy a Starbucks specialty drink for few moments working in the office and also for convenience because I can be quite lazy (to make my own coffee). This is short-term investing.

And then there are other things that I splurge on too, like furnitures because I prefer to be comfortable at home. And did I mention I like gadgets? These things are middle-term investing because I will enjoy these things for couple years at least. I always try to get the best quality with respect to pricing of course.

I consistently contribute to 401k, “spend” money to my high yield saving’s account, “spend” money to my Vanguard account (for index funds), “spend” money to my brokerage account (for individual stocks). These are long-term investing.

I don’t keep a budget because I like to keep it simple, though I’m sure it’s useful to a lot of people. I use software to track my accounts and expenses, and by doing so, I hold myself to follow the rule to spend less than I earn. Numbers don’t lie.

So essentially, you can spend less or earn more.
Or perhaps, spend less now in order to earn more for future!
Or perhaps, spend the same and work hard to earn more for now and future!
Or perhaps, earn more to spend more now!
Ahhhh, so many combinations…

What ever you decide to do, you are investing in SOMETHING whenever money is flowing out your pocket, whether you are conscious about what that SOMETHING is or not, like people splurging on fashion trends to compare and feel good about themselves. Not suggested but many people do it.

With this post, I can modify the said rule to something like spend less than what you earn while investing in both now and future evenly. To do so evenly, you will need to get your values in life clear, so go read my post on Understand Yourself.

Go.

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