Relationship with Money
A blog that knows money is more than numbers
155 | The Physics of Spending
Spending is an expectations game, and some spending has properties that are hard to see with the naked eye.
There's spending that begets more spending - the gravity of spending.
The home renovation that demands new furniture and more maintenance.
The neighborhood choice that influences your landscaping, car, and school decisions.
The travel destination that raises the bar on food, accommodations, and activities for every future trip.
The initial decision has a certain gravitational pull that draws subsequent decisions to the new level of expectations.
Then there's spending in motion that stays in motion - the inertia of spending.
Restaurant and grocery routines.
Entertainment preferences.
Online shopping habits.
These come with a certain inertia that allow them to hang around as baseline expectations much longer than we may have originally intended.
The only chance you have against spending gravity is knowing about it before you get to the new planet because it's hard to fight it once you're there.
And a way to combat spending inertia is by experimenting with the thing that is in motion to see if it really has to stay in motion.
149 | The Last $10,000
I glanced at all our credit card transactions from last year and sorted by dollar amount from largest to smallest.
The first $10,000 was spent in ~10 transactions – 10 chances to say yes or no.*
The last $10,000 was spent in ~500 transactions – 500 chances to say yes or no.
If you’re trying to be more intentional with your spending, it’s not going to happen by buying fewer coffees, cancelling your Netflix subscription, or even having fewer Amazon boxes show up on your front porch.
They are all part of the last $10,000 – too many individual decisions with too little impact.
Even when it’s this obvious, I still think it can be a lifelong journey to trust the math.
It seems like this could be a helpful nugget when we’re tempted to evaluate someone else’s last $10,000 too.
*This year, our first $10,000 will be spent in two decisions, because that is how life happens!
148 | Without a Mirror
I asked a client which financial habits were most impactful for them over their lifetime.
With a sheepish look and tone, the client said, “Well, I don’t know, I’ve just tried to glance at my credit card statement most months for the past 25 years and reflect on the past month’s transactions – sometimes it can be sort of fun.”
“Ah yes, that was a great meal with those friends.”
“Oof, that didn’t turn out like I expected – I probably won’t do that again!”
“Oh, I forgot about that one, but I wouldn’t change it!”
No tracking, no budgeting, no judgment, no rights, no wrongs – just reminiscing.
It’s too simple to think it works, until you realize that most people don’t do it.
It’s as if we’re trying to manage our weight, not without stepping on a scale, but without even glancing in a mirror.
146 | Just a Bad Guess
Once you add up what you made and subtract what you saved or spent in certain ways then you can figure out what you owe in taxes.
If you paid less than that during the year, you'll have to pay more at tax time - you didn't "stick it to the government" and you didn't necessarily do anything wrong.
If you paid more than that during the year, you'll get some back at tax time - you didn't "win" or do your taxes any better than the next guy or gal.
In both cases, you just made a bad guess - because you probably couldn't have all the information - and are fixing it.
145 | There Are No Loopholes
When you make money, you pay income taxes*.
If you don’t make money, you don’t pay income taxes.
The fastest way to reduce your taxes is to reduce your income.
But there’s the rub.
We like the sound of less taxes, but not so much the sound of less income.
So we’re left with two choices…
You can spend in certain ways to pay a little less in taxes.
You can save in certain ways to pay a little less in taxes.
But the key is actually saving or spending in those certain ways to pay less in taxes.
There are no loopholes.
*Of course, someone is going to note that you don’t pay taxes on municipal bond interest – so I’m noting it here.
136 | When Things Go South
Debt allows us to keep our blue and gray bars for now by paying for it with a smaller green bar later.
No debt means that we will use our blue and gray bars now and likely have a larger green bar later.
Debt is not innately evil or reckless.
Nor is it an automatic slam dunk or something to do for fun.
Things tend to go south in seasons without blue and green bars.
135 | Don’t Knock It ‘Til You’ve Tried It
It’s easy to be convinced that you should avoid debt.
And if you haven’t learned to save yet, then please stop reading – do not pass GO, do not collect $200.
But if you’ve established a habit of saving (which also means you know how to govern your lifestyle), then debt doesn’t have to be the devil.
Debt, in its healthiest form, helps us spread cost over time – nothing more and nothing less.
And sometimes spreading some costs over time, even onto a future self, gives us the flexibility, cushion, and even relief that some seasons of life demand.
No need to knock it ’til you’ve tried it.
132 | A Friendly Reminder on Paying Taxes
It’s easy to forget that the only reason you pay income taxes is because you made money.
Gratitude for money made or grumbling about taxes paid.
Which one is it going to be?
124 | Spending Observations
Financial wealth you have accumulated means nothing without the context of what you need.
What you need - or expect - is best reflected by what you spend.
Reflecting on a single month of spending is misleading. Reflecting on a year of spending is interesting. Reflecting on a few years of spending tells a story.
Some spending happens on purpose. Some by accident. Some out of obligation. Some with discretion. Some happens once. Some happens over and over again. But it all counts as spending.
Most feelings and emotions around spending point back to two questions - is my level of spending viable? Does my spending drive lasting contentment?
Many "one-time" things can make for one recurring expectation. There is no end to the list of things that we can spend on.
Debt is a tool to spread cost over time, which is a polite way of saying debt allows you to buy something that you can't afford right now.
Paradoxically, debt often decreases contentment, while generosity often increases contentment.
It's easy to think you'll be generous once you have "enough". I think you'll begin to more clearly see "enough" once you are generous.
A good filter for any spending decision is “how will this change my expectations in the future?”.
Some spending is a standalone event and some spending begets more spending - the latter is the one that allows our expectations to change without even realizing it. The former is not as big of a deal as we often tend to make it.
It's easy to think that "spending less" is good and "spending more" is bad - I'm more interested in the non-financial benefits that accompany spending. The best spending leads to non-financial wealth.
A crude quality of spending metric is hours of contentment per dollar spent. Hours spent anticipating and reminiscing can count in the equation too.
Most everyone says they prefer spending on experiences over things, but that's not how everyone actually spends.
Inevitably, you will regret some spending decisions - forgive yourself for them, but don't totally forget them.
Knowing where you spend dollars provides a freedom that reveals itself in the tighter times, "we need to spend less on _________" is a sneaky freedom that is 100x different from "we need to spend less". *If your income has never decreased, you probably can’t appreciate this one.
It's a lot easier to say "no" to 1 thing than it is to say "no" to 1,000 things. Spending $5,000 less on a home or a car or any other big thing is the same as saying no to a daily coffee for almost 3 years.
No one ever built financial wealth by accumulating sign up bonuses for credit cards or getting 5% on travel.
Missing one monthly budget never wrecked anyone's finances. Missing every month's budget probably means you have a bad budget.
A built-in governor for lifestyle creep is to buy (or wait to buy!) luxury items once you have non-wage income.
If you fear seeing the monthly credit card balance, switch to paying it down weekly or even daily for a season. Decreased fear and increased awareness is a good combo.
Trying to predict someone’s financial well being by observing a few spending decisions is about as reliable as a 365-day forecast would be from a meteorologist.
104 | Homebuying Series: No Plans To Sell
Talk to any realtor, contractor, architect, mortgage broker, financial advisor, or friend about a home and the conversation will inevitably move towards resale value.
“Buy the smallest house on a good street…so you capture good resale value.”
“Renovate the kitchen or the bathrooms… because that’s where you capture the most resale value.”
“If we were to do this renovation…would it be good for resale value?”
But…
What if you had no plans of selling?
What if the resale tail didn’t wag the building-a-life dog?
The equation begins to change.
No plans of selling provides a different kind of freedom when investing in a home.
A quirky layout is no longer a flaw that you’re afraid for others to see but instead a feature that is part of the home’s DNA and your experience in it.
A bathroom renovation might be secondary priority to a play space, because the time with kids in the house is limited and a working sink, toilet, and shower are all that kids need if they’re busy having fun.
An over-budget addition might be hard to stomach in the moment, but the dollars spent will become fuzzier with time as the relationships with neighbors deepen and milestone moments in the home multiply.
Of course, this is not a rubber stamp to funnel every dollar you have into your home.
Nor is it a recommendation to cash in all your chips at once or satisfy every single one of your heart’s bougie desires.
It’s more a granting of permission to ask more than, “How will this impact resale value?” when evaluating how you want to improve your home.
What parts of your home will you remember the most as of today?
What parts of your home do you want to remember the most in a few decades?
If you’re not planning to sell and you’re using money to discover the answer to these questions, I think it’s OK to dance with the risk of over-investing in a home.
96 | The Cost of Doing Life
The idea of 3% waste came from a friend who read it in a tweet. I’ve searched to try to give credit, but alas, I have not found the original thinker. I imagine and hope he or she would appreciate this elaboration on the idea if they were to come across it.
The general gist is that there is a baseline level of waste in everyone’s experience with money and…
That is OK.
If you’re wasting more than 3%, you’re probably being a little aloof.
If you’re wasting less than 3%, you’re probably trying to control more than can be controlled.
But for every $100,000 in income a year, we’re talking about $3,000 that will be regretted, second-guessed, forgotten, or just have less impact than originally hoped for or expected.
The 3% figure passes my sniff test, but I’d probably call it the inevitable “cost of doing life” instead of “waste”.
We’re talking about…
The convenience meal that totally disappoints.
The monthly subscription that continues many months past the last use.
The cost of groceries at a tourist destination.
The exercise equipment optimistically purchased only to collect dust in the corner.
The price increase because you waited a few more weeks to buy something that was cheaper when you first started looking.
The hidden fee that presents itself at the 11th hour of a decision.
The list is endless, but the feelings of frustration or disappointment are often eerily similar.
I think the rule of thumb is less a hall pass to freely waste, and more of a clipper for financial hangnails that have the ability to drive us crazy and even hurt if we don’t deal with them and move on.
These things don’t have to go on a permanent ledger to remind us of our mistakes.
They are better used as a mental note that might better inform the next time, and a gentle reminder that perfection is often the enemy of very good.
93 | See Then Spend
Two of our three children have allowance jars. They get $1 per week that is disconnected from any chore or activity within the household.
My wife noticed that the jars tend to accumulate dollars when the kids are not thinking about them, but if the jars are top of mind, then there is always something to buy.
If they see, then they spend.
This feels eerily similar to how many of us still operate our financial household in adulthood.
We look at our account balances and then decide to spend dollars if there are enough there.
Or we look at our account balances and then decide not to spend dollars because there isn’t enough there.
Both modes of operating are just like a kid with an allowance jar - see then spend.
The challenge is that in either case, the money is at risk of driving the decision more than the values.
If there is more, then spend. If there is less, then don’t spend.
I think we all want the freedom to be able to spend or not spend without having to look every single time - decisions that aren’t determined by the dollars.
Of course, I’m not granting permission to spend without ever looking - that inevitably leads to a nagging shortfall of contentment or a perpetual uneasiness about viability.
I’m more describing a special freedom that accompanies a consistent routine of reflecting on spending and saving - without judgment, shame, or blame - that begins to allow values to drive decisions instead of account balances.
We can spend, then we can see.
This freedom isn’t tied to dollars in the jar, but a willingness to exchange 1,000 account balance refreshes or 100 “missed budgets” with 1 honest reflection.
Additional Reading
The freedom loop by Seth Godin
92 | Debt as a Family Member
I once had a teacher who said that any customer who makes up 25% of your revenue is a member of your management team and a customer who makes up 50% of revenue is on your board of directors.
This concept captured the hidden costs that often accompany something that seems so good on the surface.
The big contract is awesome in all the ways that you can measure, but it’s often less awesome in the things that are hard to measure.
It seems like debt can play a similar role in our own finances.
The larger it grows the more pull it has on our decisions and the more it begins to resemble an unwelcome advisor or a demanding family member.
Debt can seem so innocent and convenient until you realize that you’re the only person that can make it go away.
Debt has a way of calcifying a certain level of income as the only one that can work for a household.
Debt loves to see the future self footing the bill for the past self.
Debt has a way of delaying plans or completely eliminating the opportunity to pursue something unique, new, or different.
Debt has a way of making peace, contentment, security, and flexibility seem always out of reach.
Debt has a way of snuffing out dreams before they’ve even crossed your mind.
Debt has a way of looking your good idea right in the eye and saying “Nice try, but I don’t think so.”
Debt is tricky because it’s a useful tool all the way up to the point that it grabs the pen and starts writing a different story than the one we would write for ourselves.
60 | It’s Just Not That Simple
The advice is simple - spend less than you make.
But it's just not that simple.
Time and time again we get confused and that relationship becomes harder to keep tabs on than we ever imagined.
All the "one time" things make it tricky, because we don't want to count the car repair or the vacation or the medical bill in our "normal spending".
If we've built up some amount of cash on hand, it's tricky to tell if the dollars spent came out of our paycheck or our savings account.
If we use debt, it's tricky because in spirit we've "spent" the full amount of the loan, but the monthly payments make it seem like we've spent much less.
If we use a credit card, the moment we've swiped the card the dollars are spent, but the statement 30 or 45 days later makes it seem like the swipe wasn't the real decision to spend.
If we receive a gift and spend it, it's tricky because there's a chance that we've increased our baseline spending expectation without the promise of a repeat gift.
The trouble is that even a simple financial household with one or two of these nuances makes it difficult for most folks to know how much they spend.
Because we assume that everyone knows how much they spend (they don't!), spending advice quickly gets reduced to categorizing transactions and the level of engagement for non-CPA- and non-engineer-types plummets to zero.
Instead, start with figuring out how much you spend.
That's it. Nothing else.
That alone will put you ahead of most of the population.
There's too much emotion tied to the categories, particularly if you're leaning into the exercise for the first time.
When we reduce it to the numbers, we temporarily take the emotion and personal preferences out of the "quality" of the spending that is or isn't happening.
Even the least financially savvy person knows that you can't spend more than you make forever, but too many spending conversations get stuck debating the merits of individual categories that we lose track of the bigger picture.
The reality is that if you don't know how much you spend, then you don't have a prayer of determining how much is enough.
Don't worry about the categories until you know how much.
59 | “Give Until It Hurts” is Bad Advice
It's too abstract.
It ignores the nuance of people's life experience and unique personality.
It ignores the nuance of different types of resources.
It lets some people with a low bar for "what hurts" off the hook.
It drives others with a high bar for "what hurts" into tough spots.
It's impossible to create any kind of accountability.
It pretends like it's black and white, and once "it hurts" you have arrived at a state of enlightenment.
The reality is that it's a lot grayer than that.
I think there are two spectrums that begin to provide some direction for where we're trying to go.
The first has to do with the resources that are being released or given away.
Relatively speaking, time and talents are typically easier to give away than financial resources.
Some percentage of your income (purple) is harder.
Some portion of what you have accumulated in cash, investments, and real estate (blue, gray, and yellow) is even harder.
With each step, you're releasing more power, control, discretion, authority, and optionality to someone else and that is a hard thing for most humans to do.
The second has to do with where or with whom the released resources land.
*This feels more personal to a person's specific worldview and faith convictions, but I am using our own personal Christian faith as the basis for this spectrum.*
Relatively speaking, releasing resources to your own personal interests is the lowest level of engagement or "others-centeredness”.
Giving that contributes to the common, social, or cultural good is a higher level of "others-centeredness".
Giving that reallocates financial wealth and repairs relationships with the most vulnerable members of our society is the highest level of "others-centeredness”. We typically view our traditional tithe as a component of this category.
Personally speaking, our aim with our finances is to continually move up each spectrum over our lifetime keeping in mind that...
Giving before death is greater than giving after death for refining our own relationship with money.
Giving relative to our own level of financial wealth is greater than the absolute amount of the gift for our own relationship with money.
My hope and belief are that this framework allows us to participate in the redemption of all things, refines our heart to be more like it was created to be, and in turn, plays a role in helping us clarify and discover "how much is enough".
Thanks to CC for helping clarify these thoughts!
48 | Pricing Land Mines
I took our two older kids to the movies for the first time. We ate more popcorn and drank more Sprite than we ever would at home. We experienced the magic of watching a movie in a theater. We took a picture beside the cut outs in the lobby. We had a shared experience that all three of us added to our memory buckets.
It doesn't really matter if the popcorn was $5 or $15 or $30 of the $45 that we spent for the experience.
The funny thing is that it's easier to say that than it can be to actually feel that way.
It's all too easy to focus on the specific price because it's easy to measure, while appreciating the general value is harder because it's impossible to measure.
Movies aren't the only place it's easy to get stuck on the price. There are little "pricing land mines" everywhere that can ruin an experience if we don't maneuver around them or disarm them ASAP.
A professional sporting event costs $20 to get in and sells a beer for $15. How different would it feel if you paid $35 at the door and received a free beer ticket?
An online retail item costs $70 and then on the next screen you realize that shipping costs another $10. How different would it feel if the list price was $80 and there was free shipping?
A hotel costs $300 for a night and then charges $30 for self-parking on-site. How different would it feel if the room cost $330 and the parking was complimentary?
It's hard to recognize when you might step on a "pricing land mine" until it has already exploded.
A few ways to navigate them are...
Observing how often you or someone you're around talks about the specific price of things - notice whether it emphasizes the price or the value received.
Zooming out and describing the experience as a whole instead of the individual components. Name the value of the things that you're getting - they're not always obvious and they are different for everyone.
Acknowledging that the "whats" are much easier to discuss than the "whys", but the "whys" are what actually drive contentment. Name the "whys" behind the decision to spend in the first place.
Remembering that someone else's price doesn't have to change your experience.
27 | Homebuying Series: The Features Always Sound Good
The features always sound good - a two-car garage, ample storage space, beautiful landscaping, extra bedrooms, etc. will sound convenient and comfortable to many people.
Zillow is going to highlight each of these wonderful features too.
In a sneaky way, this begs us to use the "features" to establish our preferences instead of establishing our preferences to evaluate the "features".
"This house has a beautiful front porch that might increase the chance we meet some neighbors" is wildly different from "We desire to rub shoulders with our neighbors on a daily basis, so we will look for a house that has a front porch”.
“This house has a large yard that will give our kids a chance to play outside" is wildly different from "We want our children to learn to play and enjoy outdoor spaces, so we will look for houses with large yards”.
"This house has tons of storage space that will be great to have in case we need it" is wildly different from "We need extra space to store things that are critical to our current and future well-being, so we will look for a house that has plenty of storage space”.
This might seem like splitting hairs, but when the house in reality is inevitably different from what it was in theory, the difference in intention dramatically impacts the odds of experiencing lasting contentment or lingering regret.
Simon Sinek says it in relation to business, but I think it applies to the modern-day homebuying experience too...
When you have a clear sense of your "why", you tend to ignore all the distracting features. When you have a fuzzy sense of your "why", you tend to obsess over all the features.
26 | Homebuying Series: The Discipline of Renting
I once heard someone say, "There are two forms of pain: discipline and regret. You get to pick one!"
To be clear, if we're searching for a home to purchase, "privilege" is a more accurate descriptor than "pain". With that said, I think the discipline/regret concept still applies to renting before buying in a new city.
Both times we have moved, we've rented for 9 to 12 months before landing in our first home in a "new" city. Ironically, my wife and I actually grew up in the two cities where we have moved!
I've heard other friends take a similar approach and say things like...
"I never knew that neighborhood existed and I grew up in this city."
"We've been able to see where our closest community actually lives and decide to find a home closer to them."
"We realized that there are a few wonderful neighborhoods that put a lot less strain on our finances than where we were initially looking."
As painful as it is to delay feeling settled in a home, this "pain" pales in comparison to settling in the wrong home.
As painful as it is to "move twice", this "pain" pales in comparison to moving once and second-guessing your decision until you move again.
As painful as it is to live in a "less-than-ideal neighborhood" for a year or two, this "pain" pales in comparison to locking in a mortgage in the wrong neighborhood.
As painful as it is to meet people while living in a temporary location, this "pain" pales in comparison to having your home limit who you will meet.
As painful as it is to "throw money down the drain" with a rent payment, this "pain" pales in comparison to building equity in a home that doesn't match the life you want to lead.
Because of the taboo nature of money and our feelings towards money, I suspect there are plenty of people who feel the regret side of all of these examples, but struggle to name it and certainly struggle to share it.
Renting doesn’t mean you can’t afford a home and I don't think it means your unsettled either.
In a sneaky way, renting buys time, options, and flexibility that ensure we're making decisions about our money instead of money (and our home purchase!) making our decisions for us.
24 | Homebuying Series: Zillow is Not Your Friend
Comedy is both useful and funny because it says things that can be incredibly challenging to say without humor.
Thanks to Saturday Night Live, the following video probably communicates enough on its own. Please note this video could be offensive to some people and perceived as NSFW.
Browsing Zillow, particularly if you’re not actually on a house hunt or haven’t defined what you’re looking for, is a slippery slope when it comes to our collective relationships with money and contentment.
Browser beware!
23 | Homebuying Series: Hospitality 101
My wife came across this incredible reflection on using a home and caring for others.
When someone leaves your home, will they feel better or worse about themselves?
This feels like a good litmus test for whether your home is an avenue for friendship or a barrier to friendship.