Rethink expenses and spend happily

By Randell Tiongson on February 8th, 2011

Here is a guest post by my good friend and wonder boy Dodge Ronquillo. Awesome read!

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Rethink Expenses and Spend Happily

Expenses are things we spend money on, sometimes wastefully. That’s why all successful businessmen and all respected finance gurus advocate living disciplined lives and reducing expenses–to set aside money for savings, investments, and emergencies.

However some of us may think that to have a wealthy life, we should scrimp out on everything else until we amass a big amount of money. I think that living that way is missing the point. Save up a good chunk of your money and place it in places where it can grow and spend the rest–but stay within budget and don’t get in debt. Expenses are and always will be a part of our lives (unless we live in self-sufficient farms with a water supply and a source of renewable energy).

Ironically, that means we are free to spend. The question is, how do we spend the money that we work for? This is not a blog post on how to save more. This is a post on how to spend more happily.

Two Kinds of Expenses

I believe that there are two types of expenses. The first kind is what we normally pay for. Let’s call these requirements. In other words, our cellphone bills, utilities, association dues, transportation costs. We need these to live.

The other kind of expense is the kind we splurge on. Let’s call these happy switches. Our movie tickets, dinners out, gadgets, books, clothes. We want these to reward ourselves.

Now, do you feel better spending Php 1,200 on your cellphone bill or on a few new tops or new Mac accessory? I hope you see what I’m getting at. If we aren’t happy with how much we earn, then we should probably rethink how we spend. Don’t reduce spending; rethink it. How much of your money goes to paying bills instead of going out with friends?

So yes, the trick to being happier is reducing our expenses, but just one kind–the requirements. I suggest cutting down on requirements and spending more on happy switches. I don’t think I know anyone who prefers paying bills over going out to dinner with friends.

Two Things You Must Understand

1) This assumes you follow a rule for saving up. I like I like a ratio shared by a friend of mine (According to him it’s T. Harv Eker’s ratio): 10% Savings, 20% Investments, 10% Charity, 10% Education/Self-improvement, 50% Expenses. Spend happily but don’t go beyond 50%.

2) This is a way to feel rewarded no matter what our income level is. It’s a realistic and short-term way of enjoying what we work hard for. This allows us to feel rewarded while still saving up money for the future. I’m sure I’d prefer to watch movies and go out for dinner rather than give that money to the bank for my credit card bill.

Apparently, there is a way to be happy now and in the future. Go ahead and spend happily!

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Rethink expenses and spend happily