When it comes to my money, the idea of trades has always been central for me. I guess it started when I was a kid and my father set me up with a paper route and told me I was responsible for buying what I needed other than the roof over my head and food. Well, it was harsh, but I sure learned quickly. I recognized that if I spent money on one thing, then that money wasn’t available for something else. It’s like if I buy the candy, I’d have traded away the new socks until a later time.
This “trade reflex” I developed has served me well—it still does now even though money isn’t tight. It’s the way I keep my financial priorities front and center in my mind. It doesn’t mean there isn’t any room for “candy”, but that I’m thoughtful about how my purchases, even small ones, affect my ability to do or buy things I might value more.
Unless you have more money than you need, every expenditure is a trade, delaying or even eliminating something else. The key is to know your trades and trade smart. I see weighing trades as a three step process.
FIRST Create a simple list of everything you ever wish to have or to do costing say $100 and up. This includes from the smallest (i.e. a new cell phone or bath towels) , to the medium-sized items such as a special vacation or a better car, to your very biggest wishes (becoming debt free, changing careers, starting a business, living on one salary, your children’s education, or paying off your home) .
Add to that list everything you spend money on repeatedly that is an optional purchase. Things like a daily cappuccino, eating lunch out most days, eating out at good restaurants, getting your nails done regularly and so on.
It may not be easy to decide what goes on the list at first, but revisit it as needed and in the long run you’ll find the payoff to be just terrific. Also, if you share your life with someone else it really should end up as a combined list.
NEXT For the big items, break them into monthly or annual steps or targets. An example would be to save $500 a month for 36 months for that new car, or $200 a month for a special family vacation. For the repeated optional smaller purchases like eating out, add up approximately what you spend on each of them, annually.
FINALLY Now choose. Which things are most important? Which come first? What are you willing to trade for what? This is entirely a personal choice.
As I said, unless you have more money than you’ll ever need you can’t have it all. You have to know your trades and decide what comes first, second, or maybe never. It may be difficult to face some of your spending choices this way, but deciding to cut back in some area may be the only way other more important priorities ever become real.
Are you willing to give up some of your wish list, at least for now, to see to it that you get the things that matter most, and get them as soon as possible? I sure am. Especially when the likely alternative is that I’m not going to get what matters most to me for a long time to come, and maybe never.
So develop your own “trade reflex” by deciding what things you want most, and what you’re willing to trade to get them. It’s one of the keys to making your money work for you and getting to live the life you want.
Happy trading!
To read more on financial trades and reaching your financial goals, see Money Smart.