3 Things You Are Doing Which Destroy Your Finances

Often times, when we are starting the financial freedom journey, it feels like we have to cut back on everything. Creating your budget, finding out where to cut costs and what to keep, can be difficult. It can even feel disheartening at times.

I want to talk today about the other end of that spectrum. After you’ve been living on a budget for a while and there’s more room for flexibility in the budget, what should that look like? Sometimes, we can get carried away. Where is the line? How much is too much, and what should we be spending our money on?

Each person’s budget is unique.

The first thing to remember is that your budget is your budget. It’s not the same as your parents, friends, neighbors or ours. Your budget will reflect what is important to you, and the way you spend your money will reflect that. For instance – our plan does not include a huge “entertainment” budget right now. I have food allergies, and it’s difficult for me to eat out often. So we don’t really budget a lot for it. However, home cooked meals and quality time with people in our home around a dinner table is important to us. So we have a significant portion of our budget spent on weekly groceries, so we can eat simple, healthy, home-cooked meals on a regular basis.

For others, it may mean a bigger “eating out” budget and a lower grocery budget. Or a big entertainment budget, but less on other areas. Whatever is important to you and your family, that is what your budget should reflect.

Everything is not fair game.

Frequently, something happens when we start to “cruise” in our budget. When we find a good groove and an ability to manage our money better, we start to think we can spend a bit more. I can take some money from this area of the budget, in order to buy that. We increase certain areas of our budget and increase our spending.

I call this “leveling up” your lifestyle, and we strongly discourage it here at FFL. Simply put, increasing your spending and your lifestyle as income and ability increases is a dangerous game. It can be difficult to get ahead in your finances when you are constantly increasing your lifestyle.

Splurges are great! As long as they’re planned.

Contrasting to what was said previously, I would argue that it’s OK to purchase nice/new things if they are in your budget! If you are debt free and living on a strong working budget, it’s ok to plan for extras. The important thing to remember is to plan for them. There is nothing wrong with wanting to have nice things, provided you can fit them into your budget.

I would also encourage a healthy balance between purchasing and saving. If you’re not saving, but spending on the latest technology, a better car, or other frivolous items, those are unwise choices.

There’s nothing wrong with purchasing extras, splurging on a few nice things, but your budget needs to be balanced first. If you are still in debt, not saving, and using credit to fund your lifestyle, those are unhealthy financial choices. Be wise, and spend within your means. Make sure you are debt free, and your extra purchases are planned for and reasonable.