When I started “Rat Race Off Ramp”, I highlighted a few ways to think about money, saving, and spending. Two of my early posts were “Money and Your Life” and “Spending with a Different Mindset.” In another post, “Are you a victim of the Diderot Effect,” I wrote about how ‘lifestyle creep’ and ‘keeping up with the Joneses’ allows materialism to encourage and potentially dictate our purchases based on what we and others own. The goal of those posts was to spark some self-reflection about your spending and saving habits. Over the next few posts, I’m going to discuss how to consider the trade-offs for your purchases and how that can affect your personal finances over the long-term. The overarching theme of this series of posts is the same as the title: Just because you can afford something doesn’t mean you should.
What exactly does that mean?
Simply put, having the ability to buy something, whether with savings or credit, in no way obligates you to actually make a purchase. In other terms, it means weighing your financial decisions to figure out what the trade-offs are for each purchase. Every single financial decision we make has a trade-off, and some even have cascading, longer-term effects. We all make financial decisions, but we all approach these decisions differently. Some people just buy things with little to no thought. Other people consciously decide if they want to purchase something. Even others have strict budgets and won’t make any purchases they haven’t planned and budgeted for.
If you already consider trade-offs before making financial decisions, great! I hope I can provide some insight to help improve your decision making. If you aren’t considering trade-offs before making financial decisions, taking small steps to start thinking about your purchases may go a long way to changing your financial future.
In more financial terms, the considerations you make before a purchase could impact immediate/one-time spending (like buying a smart phone), continuous spending (utility bills), meeting financial goals, saving (emergency fund or retirement), or paying off debt (student loans).
How can you change your future?
By considering the trade-offs of your purchases, you may decide to wait on a purchase, purchase something less expensive, or still make the purchase. By realizing what the trade-offs are you may start to see how you can save more for retirement or reach a goal or pay down debt more quickly. In upcoming posts, I’ll go over specific examples of things people do with money simply because they can.
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