16 Jun

Champagne taste on a beer budget?

What is your money dial?

Very often I thought of myself as a person who has “Champagne taste on a beer budget”. And to a certain extent I do believe that it is true. I am from the people who like new gadgets- robot vacuum cleaner with a set timer, the best cooling fans, best kitchenware and houseware. I also spent more than 400 on a steamer to clean my home in a eco friendly manner – that is luxury, believe me.

Those purchases for sure classify in splurge category when it comes to budgeting on a low budget. Do I need to cut off such purchases altogether, in order to achieve my financial goals? 

In some cases, the answer will be yes – especially when the purchase is a compulsive one. Moreover one should abstain from such purchases if a loan has to be taken out to have them.

I figured what my long term goals are and I adopted the strategy of “pay myself first”, which means pay my long term goals first. Once that is done, I was left with the simple decision in which areas of my life can I go for champagne and which areas are more of a beer area. 

I came across a concept developed by Ramit Sethi with regards to money dials. The concept says that we have a category of life which brings high value to us, and we are willing to untie the pouch with coins, as opposed to other areas, which don’t bring such joy and satisfaction. 

Here are the money dial categories according to him

  1. Convenience
  2. Travel
  3. Health/fitness
  4. Experiences
  5. Freedom
  6. Relationships
  7. Generosity
  8. Luxury
  9. Social status
  10. Self-improvement

My money dials are convenience, relationships, self-improvement. Once realizing what brings high value to you, it is way easier to trade off some expenses which you make automatically, in other areas of your life, just because you got into the habit of doing so. 
I traded take aways, and dining out 2 times a week (except a good English breakfast from time to time) for things which currently make more sense for me at the moment. 

It is important to appreciate that different stages of our life will bring different experiences. Travel was a big part of my life in my 20’s. 

I had periods of my life when every time I would lock my front door would be with my passport in hand going somewhere abroad. My day job was a tour guide and my weekend job was in the next door country. So I had to hit the road and go 150 km away. That was my lifestyle and I loved it. I was a traveller by heart and by calling. 

When a certain area of life reaches saturation and reaches full cycle another area starts having prevailing appeal to it. I see my friends booking vacations regularly and enjoying a good quality time exploring new places… And I am happy for them – that is their money dial currently. I guess I would eventually revert to travelling as a money dial at some point in the future, as it is a very enriching experience indeed. 

A budget which allows for your money dials to be satisfied and long term goals achieved is a healthy one. The most important part of it is to make a revision of what money is spent habitually on categories which don’t matter and cut back on those things. 

A trade-off is always needed in life, we need to sacrifice something in order to achieve the desired outcome. Whatever the wish is -convenience, lasting experiences, a healthy relationship or being fit, there is always a price to be paid in one form or another! Cheers (we have bubbly and beer cooled in the fridge- depending on which dial are we drinking for :))). We have also wine for the ones who find this saying rather discriminatory for the potion of Gods 😉

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