money

the importance of personal finance

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money-wise, 2018 is not starting out great. i’ve been hit by a number of big ticket expense items, with more to come. today i’m reflecting on the importance of cultivating a relationship with your finances. due to well-thought out financial planning, i’ve been able to absorb pricey unforeseen expenses with little stress, and continue to work with my finances in a way that is true to my values.

there is a stigma to talking about money in our culture, and i want to break that because i believe our finances are essential to living happy and healthy lives. i am sharing my experiences with personal finance in the hopes of helping others. please understand that i am speaking from my own personal belief system and set of experiences. i hope to present concepts that are universally applicable, but how these play out in my life may look very different than others. what i’m writing is not gospel, but one example out of many possibilities. take what works for you, and leave the rest!

previous financial literacy posts:

  1. let’s start talking about money
  2. defining money
  3. financial independence

january started with an emergency trip to the vet for one of our cats. our mirah ended up requiring multiple trips to the vet, medication, and x-rays. then i weathered a surprise car repair to my trusty old honda accord that’s literally been around the country and back with me over the last eight years. and our month will end with buying all our plane travel for our month in europe (!!! details in a later post). once all is said and done, i will be set back close to $3000 in unusual expenses, which is roughly 18% of my typical yearly spending (aka a lot of money for me).

does it stink? heck yeah. am i worried about it? not at all, and for two reasons. the first is that i fully appreciate the value of these unusual expenses, because they align with my values and goals. the second is that through financial planning, i have put myself in a position to have about a years worth of living expenses in an emergency fund.

i cultivate a relationship to money that treats money not as something to be had or lost, but as a representation of my life energy. i only desire to have as much money as i need to live a comfortable life where all my basic needs are provided for. i view money as a tool for achieving a life that aligns with my values, and as such i try not to get emotionally attached to how much money i have in my bank account. when the market rises like it is now and my investments skyrocket, i shrug my shoulders. when i have to shell out thousands of dollars for life crises, i shrug my shoulders. to me it is what it is, what’s important is adjusting my financial plan to meet my current needs.

i practice value-based spending, or spending money through conscious choices that support my life values and vitality. this isn’t something easy and it doesn’t come naturally to most of us, because we aren’t taught personal finance in our schools. it requires first being honest with yourself about what really matters to you in this life, and second measuring each dollar spent against these values and developing the discipline to say no to spending on things that don’t measure up. it’s a practice, and i am constantly adjusting to meet my needs as my beliefs and interests evolve.

so after years of examining my spending habits and evaluating every purchase against what’s important to me, i trust that when i spend money it’s for a meaningful cause. i try not to make impulse purchases because i know these do not bring joy or meaning to my life. on the converse, i’m willing to shell out top-dollar for the things that do bring joy and meaning to my life – things like my pets, my ability to be regionally mobile by owning a car, and slow travel.

our three cats bring an immense amount of love and laughs to our life. i can’t imagine a world without them, so spending on their vet bills is obviously in alignment with my values. i want to provide them a healthy and happy existence and would never compromise that to save money. owning a car is a bit trickier. i’ve grappled with guilt over car ownership for years. cars are dangerous and consume fossil fuels at rapid rates. they are also unnecessary in our small town where most places i go are accessible by walking or bike – free activities that also promote good health. however, owning a car allows me to visit my far away family frequently and cheaply. it also allows me the freedom of accessing remote locations for camping and hiking, two of my favorite activities. as such, i’ve decided that the benefits of owning a car outweigh the negatives for me, and i compromise by walking or biking as much as possible. i also spend on preventative maintenance for my car to try and keep it in good shape – indeed the only issues i’ve had with the 12 year old gal are issues caused my user error (bent tire rims and cosmetic body damage). so when a mechanic recommends something to keep my car working for another few years, i oblige, knowing that having a car is important to me for the above reasons.

realizing that the money is exchanged to keep these two value-approved things in my life lessens the stress around these big purchases. they are no-brainers to me because i’ve already thought through the philosophical ownership of cats and cars and decided it’s worth it to me. by owning these things in the first place, i’ve already accepted the risk that there could be high price tags or emergencies that arise. i think it’s important to not feel stressed about money in the moment because stress causes us to make poor decisions. this doesn’t just apply to expensive purchases, it applies to all our spending.

to me understanding personal finance begins with the application of value-based spending. when we have a better grasp on our relationship to money, our values, and what we are spending our money on, we are in a better position to begin financial planning and set goals. we can hardly evaluate our spending habits or make a budget if we don’t grasp what’s important to us and how we should be spending our money int he first place. personal finance includes the world personal for a reason – i don’t believe there’s some list of tips or dogmatic method that can make someone financially savvy. our financial aptitude comes from understanding our personal situation and our unique beliefs and values. when we work from an individual place we are more likely to create a financial plan that actually works and is sustainable for oneself.

of course, there are some common sense guidelines, and for me one of them is building an emergency savings fund. i keep my savings fund relatively high, at one year of my annual living expenses. this is an exact number derived from years of tracking my spending habits, not some ballpark guess. this is what feels good to me and i’m happy to miss out on some investment opportunity for the feeling of security from always having this amount immediately available to me. it comes in handy on days like today where i can no-sweat charge $1000 for car repairs and know i can pay it off tomorrow. more on common sense guidelines and savings plans in future posts!

for now, i am spending the night practicing gratitude for personal finance. it’s days like this i feel proud that i’ve put myself in a financial position to absorb big costs. the last thing i want to be worrying about when my cat might need to be put down is whether or not i can afford the vet care to keep her alive. personal finance is a tool that can empower us to live healthier and more secure lives.

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