Do You Know Where Your Money Goes?

Every dollar you spend today is a dollar (or more) you won’t have tomorrow.

There’s been a lot of good writing lately about spending and savings decisions and how they relate to wealth. It’s a timely issue that many Americans struggle to address. As Ben Carlson recently noted, the median average savings for Americans 44-49 is just $6,200. And the number of bankruptcies filed by Americans 65 and older is triple what it was in 1991, according to the New York Times.

Even for people who can afford to save, the question between socking money away and spending it can be fraught with complexities. Much of what I’ve read recently puts this decision in a positive, aspirational light: how can you strike the best balance between saving for your future and still enjoying your life today? But the inverse of the question sounds scarier: how much money are you willing to forego in the future in order to spend now?

Like all financial choices, the decision to spend or save is an emotional and personal one. We all have different priorities that we care about, and we’ve all had different financial experiences that shape our relationships with money. Someone who grows up poor is going to think about money differently than someone who grows up wealthy. I think that’s why giving budgeting guidance is so tricky.

Generally speaking, the best advice I’ve seen for those trying to budget is to spend in a way that reflects your values. Once you allocate money to make sure your needs are met, then think about what really makes you happy or fulfilled, and focus your spending there. Here’s a good piece that highlights the difference between needs and wants.

Online budgeting tools can help you understand your current spending habits. I use, which allows me to track my spending and categorize each of my purchases. I can look at trends over time and decide if my discretionary cash is going to place that I value. And I can do all of that for free.

Admittedly, I’m a bit of a geek about this stuff. But I feel better just knowing where my money goes each month. I might spend way too much on entertainment one month, but an online tool gives me the information I need to make adjustments.

More broadly, I often wonder how many people would be better off if they paid more attention to their saving and spending than they did to their investing .(Please don’t tell my portfolio manager colleagues.) Budget choices, after all, play a crucial role in achieving financial freedom. Ultimately, you can’t invest money you don’t have.

I’m increasingly convinced that there are only four (legal) ways to build and preserve wealth:

  • Be born into it
  • Make a ton of money in your career
  • Invest well
  • Save and spend wisely

There isn’t much wisdom I can add to the first, as I certainly can’t give you any advice on how to get yourself born into a rich family. And there are endless sources available online with tips for how to invest better or with ideas about how to earn more money. With phrases like “side hustle” and “gig economy” and companies like Uber and AirBnB rising to prominence in the last decade, it seems like everyone is thinking about ways to increase or supplement their income.

Making good savings decisions is by far the least glamorous way to build wealth. I’m reminded of a country music concert I attended last year. During one of the songs, the suave crooner in his cowboy hat sang the lines:

“I got cash…yeah!”

“Should I save it…no!”

The crowd roared as he purred about using his paycheck to party his blues away. I stood in the back thinking, “He should probably save some of it. Preferably in a tax deferred vehicle.” But that wouldn’t make for a fun or catchy tune.

Budgeting isn’t thrilling – but it’s the part of wealth-building that gives us the most power. We can control our spending and saving much more effectively than we can control our earnings or our investment returns. Our earnings are at least somewhat dependent on the value the labor market places on our work. Our investment returns depend on market trends and fluctuations.

But the choices to spend or save? And the choices about what to spend on? Those choices belong to us alone (after needs are met, of course). And those are crucial decisions. Spending money and enjoying life is crucial, but it’s important to remember that every dollar consumed today is a dollar (or more) that can’t be used in the future. Spend wisely.

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