Involved Living Series Part 2: The Most Important Question to Ask About Every Purchase

This is Part 2 of my Involved Living series where I am talking about our journey to financial independence. If you are just tuning in, I highly recommend you start with my intro post, then read Part 1 to give you all of the background on why I’m sharing this and how we plan to achieve this goal.

I mentioned in my intro post to the Involved Living Series that I wasn’t immediately on board with this whole financial independence thing. I wasn’t sure it was even possible, so I was not so keen on giving up things that didn’t seem to hugely affect our finances. I liked my little shopping excursions, Starbucks, eating out, and just generally not worrying about spending an extra $5 here or $15 there. Could a $40 meal at a restaurant really make that big of a difference to our goals or buying a $10 decor item on clearance at Target?

Buying these things once, and never again would of course not really affect our goal. But when I added up what Saturday date night at a restaurant, a couple of lattes a week, and maybe a few small purchases cost us throughout the month I was surprised at how much it was. Then I looked at all of the other things we were mindlessly spending on, and by simply cutting a bunch of small things, our savings became huge.

Let me give you an example.

We would typically average about $40 extra per week on restaurants between dinners out, lunches out, and coffee shops. Some weeks would lean more heavily towards dinner out, others would be more lunches and coffee, but on average we spent around $50. I figured I would spend about $10 purchasing ingredients to make similar food at home, so that’s how I came up with the $40 extra spent per week. That $40 per week is $2,080 per year. Okay, that’s a good amount of money, but it’s not buying us financial independence. Or is it?

Take that $2,080 and multiply it by 10 years. That’s $20,800! Twenty thousand dollars. On eating out. Holy cow. Then if you multiply it by 20 years, 30 years, or your entire lifetime, it’s a small fortune. The food at restaurants can be good, I’ll give you that, but is it that good? We decided it wasn’t, and it was better saved for getting together with friends and family or a very occasional treat rather than a regular thing for just the two of us. The extra bonus is now that we eat at home most of the time, it is a fun activity for us to attempt new recipes to try and recreate our favorite restaurant meals. Now I prefer many of our home meals to the restaurant versions we used to spend so much money on.

When I realized that simply cutting out one thing could amount to so much, I started finding ways to cut everywhere. $5 per week on something was no longer just five dollars, it quickly became thousands of dollars when I realized what it was costing us in the long run.

I like to multiply savings of things I would normally spend on regularly by 10 years. The reason is because saving up for a goal like financial independence doesn’t happen overnight. It takes years and years of saving and investing. Every dollar adds up, and this is very much one of those marathon-not-a-sprint things.

Even finding little ways to save – $1 here and there, week after week makes a difference. $1 a week is a $520 savings every 10 years. When I find a way to shave the cost of something I buy regularly, it directly affects our goal. All of these small savings we make year after year goes towards investments that earn us even more, making it easier to save more, and we get to enjoy the rewards of compound interest (that is, our interest gets reinvested to earn us more interest). When it comes to investing, the earlier and younger the better.

These small amounts may not seem like much at the time you are saving, but it is if you do it all of the time. The key is to put that savings to investments, and not spend it on other things! As I mentioned in my previous post, we are focusing primarily on rental properties, but we also save heavily in retirement accounts and non-retirement investments too.

The Big Question

I came up with a simple way to determine if something should be cut. I ask myself this one question about every single purchase:

“Will this make me any happier?”

I don’t mean happier right now, or for the few minutes I’m consuming whatever it is, or how good it feels to wear a new outfit (because it stops being new very quickly), or that fleeting euphoria from finding an especially good deal. I mean the deep down happy.

The answer is almost always “no”.

Sure, there are things I need to buy, like food, and we all need at least a certain level of clothing and shelter, but once I get past the basic essentials, there isn’t much I need.

Now, I’m far from perfect. I still buy way way more than I technically need, but asking this question has stopped me from splurging on something more expensive when a more basic item will do just fine. It keeps me from buying that extra JCrew tee shirt because it is on clearance plus an additional 40% off, so it’s only $8. It keeps me from going to Starbucks when I can make coffee at home. It is why I don’t usually go for the more expensive convenience foods and make more from scratch. And, like I mentioned earlier, it’s why we don’t eat out very much. It’s why we installed Ikea cabinets instead of the solid wood kind. It’s really why a lot of my home sits undecorated. It’s why we got the base model car instead of the fancier model. It’s why we got the smaller house.

I could go on and on.

The thing I realized about a lot of my purchases was that I was buying stuff for the sake of buying stuff. New purchases quickly stopped being new and interesting, then I’d want more new interesting stuff, which would get old, then this cycle would repeat over and over. I decided to just stop the madness and be happy with what I have. I’m not on a total spending freeze, and I do buy new things from time to time, but the quantity has gone way down. I put a lot of thought into each purchase, big or small, and try to decide each time if whatever it is I’m spending money on will really will make me any happier.

I have been looking and every item we buy and every bill we get in the mail and see if there are ways to save – even very small ways. As I mentioned earlier, even $1 can add up over time, and lots of single dollars saved week after week adds up to thousands over time.

But that’s not the best part of it.

The best part is that by realizing that my happiness is not in any way tied to my belongings, that buying more stuff does not make me more, I feel so much more fulfilled and appreciative of all that I do have.

Later in this series I will explain how we manage our savings goals with our DIY and decorating, since I do really do get a lot of joy from making my home a happy and comfortable place to live.

I realize this might sound like a boring and deprived way of living, but it isn’t! I have never been happier, and next up in the series I’ll be sharing how we do this without living a life of deprivation.

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