Have you ever pondered about why you took a certain financial decision? If you haven’t now’s the time to think things through. Here’s a fun activity that can get you thinking and do something better with your money.
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Possessions vs Experience
It is mere human tendency to favor possessions with lasting value. However, more often than not, we get greater happiness when we spend our money on experiences. Getting a new car does seem like a cool goal, but why not share that happiness with your family at a higher frequency by taking them on a trip to Paris instead?
Treat your friends and family
Everyone loves it when they receive something that portrays gratitude, which they will do in turn on a later day as a way to show reciprocity. Support your friends and loved ones by spending a little bit on them. Buy your best friend dinner or take your kids to a sport event. Maybe even get them a skateboard or a basketball so they can expand their horizons.
Spend your days doing what you love
Spending money does seem fun, but why not explore what you can do without spending? Save all you can from as early on as possible. Pick up that paintbrush or guitar that you once used and get creative! Your end goal is to buy financial freedom. You can do things that aren’t as lucrative yet meaningful.
Plan for a longer life
Worry less about dying early in retirement. Studies show that people live longer than ever before. What does this mean? You need to save more than what your predecessors did since you can be retired for more than 40 years. While longevity is great news as it allows you to experience more in one life time, it also means you have an obligation to save more aggressively today for a better tomorrow!
Invest for the long term
Your investment time horizon is not measured in weeks and months. Instead, it is measured in years and decades. Look beyond the market’s short-term fluctuations. A globally diversified portfolio should cushion against sudden blows and allow you to accrue fantastic gains if you stay invested for many years.
Cut down your monthly fixed costs
Mortgages, Cars, Utilities, Groceries, Insurance premiums, all these are fixed monthly costs which should amount to not more that 50% of your income. By cutting down on these you’ll free up more money and have more leeway for emergency costs and discretionary spending. Start spending wiser than before!
Stop trying to beat the market
The harder you try to beat the market, the more likely you are to fail. Investing is a financial gamble you make in order to increase your money without much effort. It is a smart decision to make, but constantly trying to beat the market will lead to a downfall in your mental health. So, make sure you take the right decisions while also giving yourself enough time for yourself and your family without worrying about your money.
View market declines as sales at a department store
Stocks have a fundamental value. For a diversified portfolio, that fundamental value will change slower than market prices. You need to focus on the dividends and earnings you buy with every dollar, pound, euro or rupee invested.
Your ultimate goal
Retirement may be your life’s final financial goal. But it should be one of your first priorities. It’s the most expensive goal so it requires consistent saving over a longer period of time. It’s also vastly different from other savings goals like buying a home or paying for your child’s education. It’s not an option. And you can’t expect to pay for it with a pay cheque since you won’t have one at that point.
Re-define your goal
Your goal shouldn’t be to get rich. Rather, it should be to have enough money to lead the life you want. You shouldn’t take on risk you’re not comfortable with. Stray too far from a global indexing strategy or fail to buy insurance against major financial risks. As your perceptions of money changes so do your goals. Your financial plan should reflect this. If it’s time to revisit your current portfolio. A second opinion never hurts. It also doesn’t cost a thing.
We hope this gives you a few ideas on how you can spend money better than what you do currently. Feel free to comment your ideas below as well!
