3585: How to Save Money by Spending Money on Yourself (No, Really) by Charlie Johnson with Jackie Beck

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[00:00:30] This is Optimal Finance Daily. How to Save Money by Spending Money on Yourself No, Really by Charlie Johnson with Jackie Beck.com. I know this sounds strange. How can you save money by spending money? If you're rolling your eyes right now or you think this is a joke, I don't blame you. But if you move on before hearing this post, you'll miss out on a powerful method for saving money. I should know. I use this method to pay off $25,000.

[00:00:59] of credit card debt in four months. In order to do this right, you need to understand how spending and saving impact your debt freedom journey. Let me explain. I used to lose money by spending on myself. For most of my adult life, I never paid attention to where my money was going. I'd spend money on all sorts of things that I thought made me happy. And by the end of the month, I'd have spent more than I earned. Plus, I wasn't any happier than before all the spending.

[00:01:29] Then one day, I hit a wall. I'd racked up tons of credit card debt through reckless spending. And my last credit card got declined. I was completely broke. I wanted to spend less and pay down my debt. But at the same time, I also wanted to enjoy life and be happy. I decided to look over my credit card statements to figure out where my money was going. This is when I had a huge realization. I was spending tons of money on things I didn't care about.

[00:01:57] So I made a change. I decided to spend money on the few things I knew made me happy and cut back on the many things I wasn't sure about. And you know what? My savings skyrocketed. And as a bonus, I was even happier than before. As it turned out, most of the things I spent money on didn't make my life any more enjoyable. So cutting them was easy. As long as I continued to spend money on the things that made me happy, I can enjoy life and save money.

[00:02:27] Over the coming months, I continued to implement this method until I paid off all of my debt. When you figure out the expenses in your life that matter, you can cut out the ones that don't. You may find that out of all the things you spend money on, only a few are really important for you to be happy and enjoy life. Once you cut out all that unnecessary spending, you can save hundreds or thousands of dollars each month and be just as happy as before.

[00:02:55] Of course, this is easier said than done. It's easy to mistake wants for needs. Maybe you think you need your cable TV, even though you rarely watch it. Or maybe you think you're a happier person going out for dinner a few nights a week, even though you'd really be just as happy eating at home. Or maybe you feel that you need to start your day with a caffeine-infused beverage from Starbucks every morning, even though you'd actually be fine with a home-brewed cup of joe.

[00:03:22] So while you want to save money, you keep spending on things because you think you need them to be happy. In some cases, you may be right, but with others, you could be dead wrong. Unfortunately, if you never figure out which expenses truly matter to you and align your spending accordingly, you'll never know if your hard-earned dollars are going to happiness-inducing, life-affirming purchases, or if you're just throwing your money out the window.

[00:03:52] At this point, you might be wondering, why not cut back on all spending to save even more money? And to that I say, do you really think you'll be able to stick to your debt payoff plan if you're not having any fun and you hate life? No. You need to have a fun budget and enjoy life in order to make it to the debt freedom finish line. And by spending money on just a few really important things and eliminating or reducing everything else,

[00:04:20] you'll enjoy life and save money at the same time. What if you could save more money by spending on things that truly matter to you? Wouldn't it feel good to save more money each month? To have more money available to put towards debt? And to do all of that while still enjoying life and spending on the things you care about? Enter the Prioritize Spending Plan. This is really simple. It's actually inspired by the well-known 80-20 rule,

[00:04:47] and it's great for saving for several reasons. The goal here is to figure out which expenses are important for you to enjoy life, spend money on them, and then cut costs in a big way on everything else. Here's how you start. Get out a sheet of paper and write down all the expenses you can think of. Try to get down everything you spend money on regularly. Rent, your phone bill, internet, food, etc. If you don't already have a budget,

[00:05:14] now's a great time to put together a really quick and simple one. Next, we're going to rank this list. Put a number next to each expense you wrote down. The number one represents the expense that contributes most to your enjoyment of life, and subsequent numbers are increasingly less important. Here's a quick example. Number one, rent. Number two, groceries. Number three, internet. Number eight, gym membership. Number four, getting lunch with best friend.

[00:05:45] Number five, Netflix subscription. Now look at your top five or six highest ranked expenses, the most important ones. If you spent your money on these things alone, could you be happy? Meaning if you ditched all those other things on your list, would you still be okay? What if for one week, you put aside money to spend on just the top 20% of your list and drastically cut back your spending or eliminated entirely the rest?

[00:06:12] If you do this and find that your happiness suffers, you might need to reprioritize your list. Most of us don't really know what makes us truly happy until we don't have it anymore. That's okay. Try again. But if you do this and find that you're as happy as before or happier and discover that you didn't really need all those other things as much as you thought you did, well, that's a discovery worth celebrating. Which expenses you decide to prioritize or deprioritize

[00:06:41] depends entirely on you and what makes you happy. If that cup of Starbucks in the morning truly does make you happy, then so be it. Spend money on it. But in turn, maybe you could cancel your cable TV subscription or eat at home more often. The goal is to spend on the few things that matter the most to you and save your money on the many things that don't. You just listened to the post titled

[00:07:09] How to Save Money by Spending Money on Yourself. No, really. By Charlie Johnson with Jackie Beck. Summer's almost here and I've been daydreaming about our next vacation, not stressing about whether we can afford it. That peace of mind comes from organizing my finances so I can enjoy the trip knowing the money's handled. Monarch is the personal finance app that tracks everything, accounts, investments, savings goals, and spending.

[00:07:37] Get your first year of Monarch Core for half off, just $50 with promo code optimal. Monarch has completely taken the mental load of tracking my finances off my plate and their weekly AI recap can even catch a spending spike before it becomes a problem. It's like having a financial advisor in your pocket. The AI assistant is a game changer. I can ask, how much did I spend on travel last summer and get an instant answer.

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[00:08:34] actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. While budgeting doesn't sound fun to most people, I think it should. You get to tell your money where to go versus wondering where it went. Tracking expenses and budgeting are super important when you're trying to improve your finances

[00:09:03] because they're exercises in awareness. You get to look at your financial situation with eyes wide open, then apply some creativity and resourcefulness to getting your needs and wants met. You also get to test your assumptions around what is a need and what is a want. Before I got good with money, I spent a ton of it eating out every day. I believed the narrative that it was too inconvenient for a young single professional in New York City to cook for themselves.

[00:09:33] But then I tested that assumption and discovered that I actually really enjoyed meal planning and batch cooking. I ate better, I saved time, and it was wildly more convenient than deciding what I was going to eat and where I was going to source it from three times each day. With a positive attitude and a bit of curiosity, making changes when it comes to reducing expenses and increasing income can actually feel like a fun game. This can be a game of self-discovery

[00:10:02] and resourcefulness rather than the drudgery and deprivation you might expect. But that will do it for today. Have a great day and weekend, and I'll be back here tomorrow where optimal life awaits.