Boring Financial Stuff Made A Little More Interesting

While I was sitting in the waiting room at the dentist's office the other day, I read an interesting article about one woman's philosophy on money management and personal finance. It at least partially redeemed the half-hour I spent waiting past my scheduled appointment time. I just wish I knew how to use graphics so I could make this blog entry look as cool as the article. Anyway...

This woman's take on overspending, budgeting, and prioritizing seemed at first oversimplified and vague, but the further along I read, the more I realized that it actually is a profoundly useful system that requires us to really examine what we consider necessary in our lives. She assigned every potential purchase to one of four categories as follows:

1) NEED IT AND LOVE IT

2) NEED IT BUT DON'T LOVE IT

3) LOVE IT BUT DON'T NEED IT

4) DON'T LOVE IT AND DON'T NEED IT

Categories 1 and 2 receive the top priority, since both include things that we need. We buy these things before anything in categories 3 or 4. Examples of things in category 1 would be a great-fitting new winter coat in a favorite color to replace our old one that's worn out, or a replacement tube of our favorite lipstick (yes, guys, that is a legitimate NEED, and don't try to tell us differently, especially if we haven't had our chocolate yet!). Category 2 would be things like auto insurance, gas for our car, the utility bill, etc.

Whatever money we have left over after paying for the things we need can be devoted to the things we love. The woman referenced in the article would seriously stop and examine every potential purchase in these two categories, and she ONLY bought something if she absolutely loved it. Meaning, she wouldn't settle for the shoes that were on sale for 40% off but weren't exactly the color she was looking for. Or settle for the dark chocolate Godiva bar when what she really wanted was milk chocolate. (I know, I know - who cares? It's freaking GODIVA, right? But I digress...) And if she could ever place an item in category 4, she never bought it at all. EVER.

For those of us (like me) who are number-crunching, what's-the-bottom-line kind of people, an approach like that can seem a little hinkey. But she said prioritizing what she bought according to what she needed, then loved, freed her from becoming a slave to a house full of just "stuff" that sat around gathering dust and never getting used. She probably has fewer clothes in her closet than most of us, but every item is a favorite. She is surrounded by things she genuinely loves, and nothing she doesn't. And she actually found she spent much less money than if she focused solely on the dollar amount of a purchase: "Oh, it's on sale and I have the money - I should just get it while I can." How many of us have done just that, and regretted it later?

Obviously, more planning than just this should go into a personal financial strategy. We have to make a budget so we know how much money we have available to spend on those things we need and love. And we should always strive to find the best value for our dollar on non-negotiables like mortgages, insurance, and food. But I liked this woman's way of dealing with the leftover dollars in a way that held her accountable for the reasons behind her purchases, without sucking all the fun out of her life.

I think I'll try her method for a month and see if it makes a difference in not just my wallet, but my happiness and peace of mind. Anyone else game?