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This chapter is from the book

When to Spend Your Money

Money is only good for one thing—spending it. The question is when you spend it. So, that’s how we’ll break down topics in this book. The following provides a brief overview.

1. Spend Today

Spending today encompasses your current expenses. It’s so important because you make dozens of spending decisions every day. You decide whether to buy or not to buy, whether to purchase item A or item B. And you decide to buy now or buy later. The sum result of all these daily decisions determines whether you struggle or prosper with money.

The secret to successful money management has not changed throughout time: You must spend less on current expenses than you earn. How do you do that without depriving yourself? You spend your money smarter, every day.

2. Spend Yesterday

Spending yesterday is a way of saying that you should finish paying for stuff you bought in the past. In other words, pay off debt. This is a powerful type of spending and should be a priority, especially for consumer debt, such as credit cards and auto loans.

Debt, used irresponsibly, can be insidious. Its destruction goes far beyond dollars and cents. For many people, debt creates a level of stress that makes the original purchase entirely regrettable.

3. Spend Tomorrow

Spending tomorrow refers to saving and investing. Many people seem to think that saving is different from spending. Really, it’s just deciding to spend at some point in the future, such as when your child goes to college or when you retire. Of course, this goes against our very nature. As humans, we’re hardwired to consume immediately. It’s instinctual. It’s how we evolved. So, saving takes a lot of intellect and discipline. It requires us to fight back against our inner caveman (or cavewoman).

That’s why successful savers make it automatic. They stop fighting their instincts and live in blissful ignorance. For example, most people find automatic paycheck deductions that go into their 401(k) retirement plans quite painless. They don’t miss the money going to savings. But sitting down every month and writing a check to deposit into your IRA? That takes a whole different level of discipline, especially over long periods of time.

Regular saving and investing is important because most people working regular jobs don’t have enough hours in the day to build wealth from a wage or salary. You have to force your money to make its own money, whether through compound interest, stock-market gains, investing in your own profitable business, whatever. It’s the only way people of average means will build wealth.

Of course, these three concepts are intertwined. If you can’t get a handle on daily spending, you can’t pay off debt or save. If all your money is going to interest payments on debt and unnecessary daily expenses, you won’t have any to save. If you don’t save, you can look forward to a retirement featuring such meals as ramen noodles, Spam, beans and rice, pork and beans, and Alpo.

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