3649: How To Build Wealth By Spending Money Wisely by Steve Chou of My Wife Quit Her Job on Smart Spending

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[00:00:58] This is Optimal Finance Daily. How to build wealth by spending money wisely by Steve Chu of mywifequitherjob.com. And I'm your host and narrator, Justin Malek, reading to you every day with permission from the authors, all to give us both a little push in the right direction. So with that, let's keep pushing as we optimize your life. How to build wealth by spending money wisely by Steve Chu of mywifequitherjob.com.

[00:01:34] In a previous article, I discussed different ways that my wife and I save money on a day-to-day basis without drastically affecting our lifestyle. While finding good deals and extending your money is an important aspect of accumulating wealth, deciding the right things to buy and avoiding spending altogether is every bit as crucial. It also helps to leverage rewards credit cards to earn free cash and travel.

[00:02:01] Because spending and saving go hand in hand, the ability to allocate your funds wisely coupled with a proper savings plan will exponentially increase your pool of wealth. So how does saving money differ from spending money wisely? Saving money is the act of finding the least expensive method of making a purchase that has already been planned.

[00:02:25] Spending wisely pertains to the decision-making process that goes along with making a purchase. In this article, I'll focus on the latter. Know your purpose for spending money. Why do we make purchases? Most of the time, my wife and I buy things because they are either aesthetically pleasing or they make our life easier in some way. Whenever I want to make a purchase, I always ask myself the following questions.

[00:02:54] Number one, will this object make my life easier? Number two, will this object provide me with lasting pleasure? And number three, is this item filling a void in my life? I'd say that 95% of the time, the answer is no to at least two of the three questions. If you find yourself answering yes to all three questions on a regular basis,

[00:03:23] you should sit down, rethink your priorities, and raise the bar. My general philosophy is that if you keep your purchases within these criteria, the less often you will be looking out to buy more stuff. Spending wisely starts with looking deep into your life and figuring out what will bring you lasting happiness. Finding out what you truly value can be an iterative process.

[00:03:50] Sometimes you might feel like you absolutely need something only to lose interest shortly after the purchase. Early on, I set the bar way too low and I now have a garage full of unused exercise equipment to show for it. Just the other day, I decided to fire up the old treadmill only to be greeted with a cloud of dust. In any case, it may take you a while to establish the proper criteria for justifying a purchase.

[00:04:17] A good way to circumvent impulse buys is to impose a mandatory waiting period on all purchases. That way, you'll have to think long and hard before you make the decision. Avoid shopping as a recreational activity. Have you ever gone to the mall out of sheer boredom? Have you ever gone shopping without a clear objective of what you set out to buy?

[00:04:42] One of the fundamental principles of spending wisely is to avoid temptation and shopping for fun. These days, I don't even browse catalogs anymore because I'm a major sucker for advertisements. My major weakness is the Fries ad that comes out on Fridays. For all of you who aren't familiar with Fries, Fries is a gigantic electronics store that carries almost every gadget imaginable.

[00:05:08] The Friday ad always has killer deals that only last the weekend. It doesn't help either that I live within five minutes of the store, so on Fridays, I avoid the newspaper at all costs. I also avoid watching television as much as possible since I'm a huge sucker for food advertisements. I remember the first time I saw the Chili's ribs commercial for Baby Back Ribs. I immediately went out and got myself a full rack of ribs.

[00:05:36] It was good, but that meal set me back 70 bucks between my wife and me. The meal was entirely frivolous and unhealthy too, but those ribs were good. I'm salivating just thinking about them. In any case, the takeaway here is that you need to understand your tendencies and try to avoid temptation when you can. You are just asking for trouble if you go shopping without an objective.

[00:06:04] Avoid shopping with people that like to shop. There's this friend of mine who I refer to as Damage. I've given her the Damage nickname because whenever she goes shopping, she tends to swipe her credit card so often that she damages the card. The problem with Damage isn't so much that she likes to shop, but that she has this way of making those around her buy more than they need as well. Damage. Hey, this outfit looks cute.

[00:06:33] Why don't you try it on? Wife. No, it's too expensive. I shouldn't even bother. Damage. Come on, it doesn't hurt to just try it on. Have some fun. Wife. Okay. And then tries on the outfit. Damage. It looks great on you. Wow, just look at yourself. You look fantastic. Life. Really? Really? Oh, but it's $200 just for the top. Damage.

[00:07:02] Look, it's 50% off. It's a steal, I tell you. Items at this store are never this cheap. Live a little. You deserve it. Especially after carrying that baby for nine months. Wife. You're right. I deserve a push gift. Plus, it's a good deal. It only took one shopping trip for me to figure out that damage was a bad influence. It's fine to hang out with her in social settings, but I try not to let my wife go shopping with her anymore.

[00:07:31] I too have several friends who like to tempt me on a regular basis. Friend. Want to see the Fry's ad? Me. No. Why would I want to see 10 pages worth of killer deals on cool stuff that I probably don't need but would like to have? Friend. Are you sure? They are having a sale. This ad probably contains a chock full of deals. Want to take a look? Me. Nope. Not interested at all. Friend.

[00:08:01] Wow, there are some crazy deals in here and some of these are only for a limited time. Me. Oh yeah? That's nice. Friend. Didn't you say that you're in the market for a new hard drive? Me. Um, no. Why would you say that? How did he know? Friend. Because there's a great deal on a 500 gigabyte drive. Want to see? Me. I guess it doesn't hurt to take a look. Anyways, you get the point.

[00:08:31] Certain friends are great for hanging out, but not for shopping. Stay away from negative influences. Don't buy specialized products. Stick with products that have a variety of uses rather than a single specific purpose. For example, do you really need to buy a special tool to help peel your orange when you can just use a knife in your hands? Do you really need an ice cream scooper when a regular spoon will suffice?

[00:09:00] Do you really need a separate printer, fax machine, and scanner when you can get an all-in-one device? In general, my wife and I try to stay away from single-purposed items. We also tend to buy quality items that will either last a long time or save us money in the long run. For example, we've replaced all of our lights with compact fluorescent lighting to save energy, and we also use rechargeable batteries in all of our devices.

[00:09:29] Spending with your brain. Let's face it, we are all human, and we all sometimes get carried away with our purchases. The key to spending wisely is to cut out as much temptation as you can and evaluate what is truly important to you. Be prepared, because the process of discovering yourself will take some willpower, and you may well end up with some dusty old exercise equipment in the garage. But over time, you'll eventually learn to stay on track.

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[00:12:20] That's S-Q-U-A-R-E dot com slash G-O slash O-F-D. Run your business smarter with Square. Get started today. Thank you to Steve. I think we all have a version of that person he calls damage in our lives. But I like his three questions before a purchase. Will this make my life easier? Will it give me lasting pleasure? And is it filling a void?

[00:12:48] I like that last one especially because a lot of spending really is about filling a void. Boredom, stress, a rough day. And I can understand the garage full of unused exercise equipment. I'd be surprised if you don't have some version of that dusty treadmill where we were sure we needed it, and then the excitement wore off fast. His fix is a simple one, a mandatory waiting period before any purchase. And I do something similar.

[00:13:17] I have a little question I ask myself in the moment. Will future me be thankful for this? It's surprising how often the honest answer is no. Just putting a day or two or a week for bigger stuff between wanting something and buying it really can help. So if there's something you're eyeing, try giving it that waiting period and ask whether future you will be glad you bought it. Thank you to Steve for this one.

[00:13:46] Thank you for being here. Have a great rest of your day, and I'll see you tomorrow where your optimal life awaits.