10–12 minutes to read

How to Spend Money

In general, the rules below are a big picture perspective on how I spend my own money. I’m now at a financial point in my life where I can spend money comfortably because I have a great command over how I spend it. I set goals and then I stick with them.

It wasn’t always this way. I, too, made plenty of mistakes as detailed in my personal finance book, How We Prevent Wealth: A Personal Finance Reflection. However, I told myself that what was done was done. What was more important is what I would do differently.

So, I paid off all my debts, with the exception of my primary mortgages, refrained from buying new cars, and created a spending plan that allows me to retire financially free before I turn 40 years old. Most, if not all, of my story can be validated by going through this site and reading my personal finance books. Both teach how to spend money from a technical perspective. This post, however, teaches from both a psychological and technical perspective.

Keep in mind as you are going through these resources, “It’s not how little we earn, it’s the accumulation of unwise decisions that prevents us from building wealth.”

How to Spend Money, Guilt-free, and Still Give a Damn About Tomorrow

How to Spend Money

1. Reflect on where you stand, and understand where you want to eventually be, financially.

Ask yourself, what is it you want to change about your financial situation.

My financial reflection that started my journey is detailed in my personal finance book, How We Prevent Wealth: A Personal Finance Reflection. It is highly recommended that you start with this book. You can purchase using the previous link or through Amazon’s Kindle platform. It will help you with a big picture view on how to get started on your financial path.

2. Set effective goals.

An effective financial goal is one that is measurable, purposeful, and realistic. Figure out what they are and WRITE THEM DOWN. I discuss effective goal setting in detail in my first personal finance book. .

For example, if you know you want to become debt free in 12 months, then do the calculations. If you have $10,000 in debt. You’ll need to apply an average payment of $833.33 monthly. Twelve months is measurable, and the purpose is to get out of debt. But, is paying an extra $833.33 realistic for your situation? You’re the only one that will know, based on your spending and saving habits. You have to make your goals realistic.

Once you know what your goals are you’ll be able to calculate and save money specific to those goals.

3. Minimize your financial stress by simplifying and separating your accounts. 

Until you get your finances under control, have 3 accounts. Period. Two checking accounts–One for bills and one for spending–and one Savings Account.

Your bill account is for paying bills. Your savings account is for saving. And your spending account is for all the rest.

Strive to get ahead of your spending and to have all of your bills arranged such that your spending account is full and ready to pay all of your bills before the next month.

For example, if your total monthly income is $3000 and your bills total $2000, then you should strive to have $2000 in your bill account to start off each month.

For instances, if you get paid twice per month, then your aim should be to have one check sent to the checking account to pay your bills and the next check split between what your savings and checking account.

When your bills are covered and your monthly savings goals are being met, you should be able to start spending money, guilt-free.

Once your spending money is up, oh well. At least your bills and savings will be taken care of.

4. Minimize your expenses so you can maximize your monthly spending and/or savings.

The easiest way to increase your income is to minimize your expenses. Find ways to cut out or cut down on any and everything. There is always a way to reduce your expenses until you’ve found the most reliable substitute.

For example:

  • You can have an unlimited wireless plan using Sprint, on contract, or an unlimited wireless plan using T-mobile ($30+ less expensive).
  • You can pay for cable, or you can pay for satellite. Better yet, you can get rid of cable and satellite and purchase an HDTV antenna (No payments to watch broadcast television).
  • You can move closer to work when your lease expires.
  • You can refinance your home to lower your payments.

5. Work on getting rid of your debts by adding to them, the money that you save when you minimize your expenses.

If you have debts, put an effective plan in place to pay them off and STAY OUT OF DEBT, if you can help it.

Remember, though, before you can get out of debt, you have to want it.

Use an online debt calculator to learn the extra amount of money that you’d need to apply and for how long before you are rid of your debt.

I prefer you put all your extra monies into your savings account until you can pay one debt in full but, there is more than one way to knock out your debts.

Once you’re rid of one debt, use the money you were paying on it to rinse and repeat your process.

Focus on one debt at a time. Preferable the one with the lowest balance.

Knocking out the ones with the lowest balances creates a psychological win.

6. Find ways to increase your income, if you want and if possible.

Although the easiest way to increase your income is to slash your expenses and get rid of debts, the second easiest way is to find a side hustle or a part-time job. There is no reason for me to recreate the wheel so, here are over 100+ ways to make more money and supercharge your income, as written on Get Rich Slowly.

Any extra money can help accelerate your debt payoff.

7. Create a plan to be financially free.

I argue that people are happiest when they are free to do what they want, when they want. It goes without saying, then, that financial freedom is one of the quickest ways to achieve this if a plan is in place. Money doesn’t buy happiness, but having the ability to fire your boss will be liberating.

Again, my personal finance book gives a great fifteen-year plan but, the idea is to create one that fits your own lifestyle.

It talks about the 4 easy steps to build wealth:

  • Define what wealth means to us.
  • Determine what needs to happen to bring wealth within our reach.
  • Set effective financial goals to meet our personal definition of wealth.
  • Reevaluate our goals as necessary.

Your plan can come by way of investing in the stock market or creating your own business. I’m currently doing both. Again, it’s up to you.

8. Once you have your plan in place, spend-money, guilt-free, but make sure you still give a damn about tomorrow.