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Financial Planning


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January 25, 2021

Gaining Freedom to Spend: Three Easy Steps

Wants and needs are different things, and understanding the difference between the two can be the key to unlocking the “freedom to spend.”

Individuals, couples, and families alike all have things in mind such as clothes, food, trips, and experiences they would like to enjoy. However, being in a position financially to do so is a different story. In order to gain the freedom to spend money on things you want, you must understand how your money comes in and flows out. At the surface level this is a simple process–your paycheck goes into your bank account and the payments for your needs and wants go out of it. But there are a lot of complexities below the surface that take more work to understand. From your experienced financial advisor in Charleston, SC, here are three steps to gaining the freedom to spend. 

Step One: Carefully Track Your Money

The first step to understanding your personal flow of money involves tracking expenditures in detail. There are common “hidden” or surprise expenses in most families’ budgets that have an unexpected yet significant impact on how much money is left over for the things that those families would like to spend on. Here are a few examples:

  • Daily or near-daily inefficient purchases. One of the most well known is the stereotypical morning coffee purchased from a premium coffee shop. How much could you save by making coffee at home instead of buying it on the way to work? Another good example is soda – the price for a soda at an average sit-down restaurant is equal to that of two or three 2-liters of soda at the grocery store!
  • Subscriptions. What are you paying for every month that you barely use? Streaming services, cable packages with hundreds of channels, and music streamers are common examples of recurring charges many families barely think about. However, canceling rarely used subscriptions could save hundreds of dollars each year.

Step Two: Save Money Regularly

Set aside money each month in savings. A good goal is to save around 20% of your income.  Work with a Certified Financial Planner™ to develop an investment strategy tailored to your needs. For instance, if you plan on purchasing a house in the near future, then you might consider a low-risk bond portfolio and even depositing your savings in a FDIC insured bank account as the purchase date comes closer and closer. In addition to the potential investment growth, having savings on hand provides many other benefits such as being able to handle unexpected expenses like car repairs or emergency medical expenses without having to finance them.

Step Three: Budget Discretionary Expenses

Calculate your discretionary expenses–the “wants” that you want to spend your money on, such as fitness class passes, weekend travel, shopping trips, etc. Keep your goals realistic to your budget, and avoid the temptation to spend money you don’t have in order to get what you want sooner. As you accumulate wealth and build up your investment portfolio, you will gain more freedom to spend and can enjoy those higher-cost activities without jeopardizing your long-term financial stability. 

As always, having a skilled, client-focused financial advisor in Charleston, SC on your side will greatly increase your chances of making the most of your money. We look forward to meeting you and helping you and your family finally get to the activities you’ve always dreamed of.

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