Personal finance is a fascinating topic because, well, it’s personal.  There are hundreds of books, blogs and celebrities out there espousing different philosophies.  YOUR money should be managed in a way that maximizes YOUR happiness, peace of mind, and security.  Money alone cannot buy happiness, but how you spend, save and invest money can bring you freedom from financial unhappiness.

I believe there are some general truths, such as living within your means, saving for the future, investing, and avoiding debt, that should be followed, but the specifics of what each person does is dependent upon that person’s values, interests, income and other circumstances.  People usually have a lot of emotions and baggage associated with how they spend money (or how they don’t spend money).  What works in one situation or for one person may not work for someone else.

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The Power of Intentionality

My money is a scarce resource – I only have so much of it to go around and a lot of opportunities to use it.  Managing my money requires me to make trade offs.  I can spend more now, but that will cut into my savings and may hurt my future goals.  Alternatively, I can save more now and have less available to spend in the present.  I do not enjoy being so frugal that I have to count every last penny, spend hours clipping coupons to save $4 at the store, or feel guilty when I purchase a few more expensive, ready-made ingredients at the store because it will save me 20 minutes of cooking.  The be-all, end-all goal of personal finance is NOT to amass the largest stockpile of wealth possible.  My personal goal for my finances is to maximize the life that I live and provide reasonable financial security for myself and my family.

The idea that money management involves trade offs (for any econ nerds out there – think opportunity costs!) led me discover the power of intentionality in my finances.  My goal for my personal finances is to be intentional.  What does it mean to be intentional?  It means that you are making deliberate choices and taking action on purpose – not by default, accident or merely as a result of a previous choice.  Synonyms for intentional include conscious, planned, calculated, studied, premeditated, and willful.

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I realized that in order to make good financial decisions, I needed to understand my goals and preferences.  I also needed to understand my constraints.  I could not be intentional about my financial decisions if I had an incomplete understanding of my overall financial picture.  Armed with this information, I could make intentional decisions about my finances and proceed guilt-free to use my money in the way I determined was best.

When managing your money, it is important to realize that you can afford almost anything – but you can’t afford everything.  Some people choose to moderately spend and save in all areas.  Other people like to focus their spending on one big thing – like a hobby or travel.  Being responsible with your personal finances does not mean you can’t take that amazing trip through Europe that you’ve been dreaming about – it just means that you are prepared to make the necessary trade offs in order to make that happen.  Maybe that means putting off the trip for an extra year to give yourself longer to save.  Maybe that means getting a second job to help save up.  Maybe it means you move into a less expensive apartment.  Or maybe it means that you slash your budget for eating out, clothes, and entertainment.

Be Intentional

Often people get into financial trouble because they get caught up in consumerism and spend, spend, spend with little thought about what adds actual, lasting value to their life and without thinking about what their present choices will mean for their future selves.  Being intentional is the opposite of being thoughtless, impulsive, foolish, careless, or on autopilot.

Below are three ways you can begin being more intentional with your finances.

  1. Give your future a reality check.  Ask yourself how well you are planning for your future.
    • Do you have enough savings to cover your car/homeowner/health insurance deductible?
    • Can you cover an emergency car repair without going in to debt?
    • What would happen if you were unemployed for one month?  Two months? Three months?
    • Do you have a plan to save for retirement?
    • Do you understand what your retirement will look like with your current retirement saving level?
  2. Do a budget check.  Review each of your budget categories and determine two things:
    • Could I cut back in this category if I had to?  By how much?
    • How much value do I get out of this?  Rank the budget categories that you identified as able to be cut in order from easiest/least painful to cut to hardest/most painful to cut.  Now you have an idea of your money preferences.
  3. Before you spend money, ask yourself three questions:
    • What are two other ways I could use this money?
    • Would I rather use this money for saving or for one of the other options?
    • Does how I want to use this money add real value or happiness to my life?

Intentionally Avoid Financial Unhappiness

When you are intentional with your money, you maximize your money and your life.  You are able to make solid financial choices and accomplish goals because you make decisions that take into account your entire financial situation.  You create and follow a financial plan.  Because you are intentional, you are better able to reign in consumerism and avoid debt.  Debt, especially consumer debt like credit card debt, is one of the main drivers of financial stress.  Through your intentional handling of your finances, you can avoid financial unhappiness.  With time and effort, you can achieve financial peace of mind and security.

 

What helps you be more intentional with your money?  What trade offs do you make with your money?  Comment below!