Spending Money the Right Way and the Wrong Way

Spending Money Correctly

My work has officially started. I’ve missed the sweet smell of a paper paycheck (can’t do direct deposit for the first paycheck.. darn), depositing it into the bank, and watching my cash balance go up. I’m planning on practicing absolute discipline with spending money and tracking my money’s whereabouts every second every day. Ok, not that dramatic but something close to those lines.

The thing I love about money is that I control it and money does not complain about that. I get to decide if I keep my money or if it goes to someone else. The flip side is that money has power over me. Money dictates whether I get to eat the next day and whether I stay healthy with regular doctor visits. Therefore, I keep a very close eye to where it makes its trips through monitoring my spending.

When I make a spending decision to decide where my money gets to go and who it gets to go to, I make sure that I am purchasing something that is necessary to live another day. I quickly realized that my peers do not think the same way. I thought my peer’s spending habits would change now that they are out of college but it has gotten worse.

My friends  weren’t shy about spending money. Their justification to every spending habit is “I will get paid next week and the cover charge to this bar is only $5.” I don’t think they realize how much $5 is but besides that, why they choose to spend has been an interesting topic that’s been on my mind for a long time.

Many people spend money on things based on affordability and ability to pay it off, not based on necessity or need. This is why credit card companies are able to make money. They understand that it’s human psychology to prioritize ability to pay more than the necessity of the object they are purchasing.

The minimum monthly payment required from credit card companies is between $25 and $35. Credit card companies understand that most consumers look more at the minimum payment than the overall payment. “I get to have a $10,000 Rolex watch and by only paying $25 a month for it? Sign me up!” This is the wrong way to make a purchasing decision.

The fine print is that credit card charge double digit interest rates. The fact that credit card holders would have to pay an interest rate of 20+% misses their thoughts when they are purchasing that Rolex and most don’t realize they are paying a high multiple of that purchase price when they only pay the minimum. I’m all for credit cards, but not for credit cards used the wrong way.

Why do I Save So Much?

Back when I was a child, when I asked my mother to help me buy something, I would get a short but effective response of “no”. I tried to justify that it only cost $5 for a pack of Yu Gi Oh cards, but the answer still came out to be a simple “no.” Even though it was simple, that powerful word gave me the unconscious start to my aggressive saving habits.

One word gave me the roots to personal finance

She wasn’t the best model in terms of spending because she would save whenever she could but she would spend a lot as well, especially when it came to clothes. She would buy me designer clothes and highly branded clothes. She loved saving pennies but she also loved spending dollars. However, I did pick up her aggressive penny-pinching habits and focus more on saving and not spending.

Areas I’m Working on

I look for ways to use anywhere I could, even the little stuff such as electricity, water, and gas. The EIA states that the average home owner uses around 900 kWH per month. I am projected to use ~200 kWH this month and that is on the very high end of the estimate. It’s also been 3 weeks since I put gas into my car. My car is a very fuel efficient car and so my monthly gas budget is about 25 dollars a month and rarely use it. I always look for ways to save.

When it comes to saving, I am forecasted to save over half of my pretax money into my 401k and HSA accounts. I will be living on close to $8,750 after tax from now until 12/31/2016. This will pay for my rent, food, insurance, and miscellaneous expenses. It doesn’t feel that much because rent alone costs $700 a month plus insurance will cost $250+ a month. However, this is my goal that I’m making public and I will be making regular updates on this site to show my progress and whether I am failing or succeeding.

Why Pay a Premium and Use More Money?

People use money to make their lives more convenient. Instead of taking the bus or riding the bike, we buy cars or use Uber. I actually know someone in college who used Uber every day because she didn’t want to walk 10 minutes to class. So she took Uber from her apartment to campus then from campus to her apartment. Every. Single. Day. Did she also drink coffee every day? Not unless it’s a premium priced coffee such as Starbucks. Those obviously taste better even though it’s a commodity.

Starbucks  vs.  Coffee

High priced bean vs low priced bean


Another friend in college also didn’t believe in saving. Her mentality was “save for what?”. I kept quiet because I wasn’t going to judge her lifestyle but I will answer her question on this post.

  • If I wanted to start a business in the future that required a 5 figure investment, I wouldn’t want to run the risk of banks saying no.
  • If I had a huge medical emergency bill and my insurance company says they can’t cover me because of a technicality, I would be at least able to cover a significant portion of it.
  • If I wanted to take an extravagant vacation in the future, I would be able to take it without any guilt because I meticulously saved my money.

If you don’t save money, you will always be under the mercy of another to cover you. Here’s one thing I learned from dealing with people. Convincing someone to do something for you is HARD. Why make your life harder than it has to be? Take the easy way out and ease your stress by saving your money.

Convenience is great. I love paying for convenience if I feel like it’s worth it. I drive my car every day to work. I love using my phone because it provides a convenient service that I enjoy. However, when you’re deciding between convenience and money, it’s better to err on the side of money because convenience can be expensive. It’s better when your default position is to save and lose convenience than for you to have convenience and lose savings.

How do you decide when to spend money? Are you willing to pay a premium for convenience and other amenities? Let me know in the comments below!

Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

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8 thoughts on “Spending Money the Right Way and the Wrong Way

  1. Sounds like you are really on the right track FS! Others will quickly spend as if it’s nothing, and you are already showing discipline when it comes to your money. Also I like how you identified areas you are currently working on to keep your expenses low.

    • Finance Solver says:

      Thanks a lot DE! It’s inherently really bad how much others are spending. It takes a lot of labor and time to make the amount of money that others are spending and hopefully they realize that they shouldn’t spend so much. Trying to do as much as I can! I’m protective of my capital and have to make the most out of my money. I will take judging looks over losing money any day.

  2. Spending less than you earn isn’t as hard as some people think.
    The biggest obstacle for people is themselves. To save money you may have to say No to things that you didn’t really need or places that you didn’t really need to go. After saying “no” for a year or so you will be in the momentum to save and it will come naturally.

    • Finance Solver says:

      It’s hard because it’s not prevalent in the United States to save money. The Chinese saving’s rate is probably 33%+ and in that country, you are looked as weird if you don’t save that much, which is why so many people are fine with saving it. It’s harder to recognize that saving is a great thing to do when others are not doing so. Harder but not impossible! Like you said, it’s all about consistency!

  3. Congratulations on starting your job. You’ll make a fine indentured servant! 🙂 It’s really great that you’re already discussing these topics so early. If you’re able to amass $40,000 while in school you’ll have a much better time with a real income now.

    Similar to you, I decide to spend my money by focusing on value. My definition of value has changed over the years but mostly it means time. I spend about $1,600 on an apartment to be 5 minutes from the office and I enjoy the area as well. An apartment of similar quality in a suburb might be $700 but I would sacrifice 2 hours per working day in traffic. I decided early on that’s not worth it for me!

    • Finance Solver says:

      Thank you, I’m excited to add value to the business and learn as much as I can starting out! I hope that’s the case. I don’t think my spending habits will change that dramatically and hoping it won’t change with the sudden surge in income. If I do, you’ll all get to know it in my blog!

      It’s all about making decisions that offer the most utility to you! I wouldn’t be able to do a 2hr commute to go to work too because I value my sleep and free time very highly. But I am willing to save dollars by cooking my food because the utility of having that cash plus the food maximizes my utility. Value is subjective but it’s great that we get to choose what gives us the most value!

  4. Certain things make me happy and I am willing to spend more on but you really need to be conscious about your spending to know that this certain thing makes you happy. Once you know what makes you happy, you can easily cut spending on other frivolous things that you discover aren’t worth that much to you.

    • Finance Solver says:

      It’s all about allocating capital to things that provide the most value. I can’t understand how people can buy material things like an iWatch that they’re so ecstatic about buying but after a couple of days, they’re over the hype and it’s back to square one for them. Experience trumps material possession any day of the week!

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