Establishing Spending Priorities 
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We often hear all the little ways we can save money, but you have to realize that not all of those tips are suitable for everyone. Some of those tips are just too extreme for most people and some tips just go against our personal priorities.
Depending on your financial situation, you may need to make some sacrifices. At the same time, you don’t want to let your budgeting prevent you from enjoying the things you love.
Unless your situation is particularly dire, you do need to leave room for your major priorities. If you are in a very bad financial situation though, it’s probably time to make greater sacrifices at least temporarily.
Figuring Out Your Important Priorities
The part about personal finance advice that is difficult is that everyone is going to have their own priorities. It’s easy enough for an outsider to say that you need to spend less on a certain expense, but if that expense is quite important to you, that’s easier said than done.
So if you are looking to pay off debt quicker or save more money, take a close look at where you’re spending money. If you might be overspending on something or if something might be an unnecessary expense, ask yourself how important that expense is to you. Would you maintain approximately the same level of happiness if you gave up that expense or spent less on it?
The tough calls come with the purchases that give temporary satisfaction such as your daily latte or your fast food fixes. You may justify that those purchases are worthwhile since they at least make you happy for a short while. Is that very brief satisfaction worth paying more interest on debt or limiting your savings? Maybe it is that important to you, but chances are it’s an expense you can reduce.
In my case one of my major priorities is watching sports. Even though my finances are tight these days, I wouldn’t think of selling my big tv or dropping cable. Money would have to be much tighter for me to consider that option. For other people though, paying for cable may not be as big a priority and they would be perfectly happy without it. It all comes down to personal preference. The important part is that to maintain this expense, I was willing to cut back my spending on things like food, alcohol and other entertainment.
How Paying Extra For Priorities Helps Your Finances
Some people assume that you have to cut spending in every possible area to save the most money. If you have incredibly high willpower, that may be true. For everyone else though, spending some money on your high priorities helps keep you sane and allows you to maintain a stricter budget in other areas for longer.
If your budget is so strict that it doesn’t allow for any extras, that will often lead to unhappiness. You would become more likely to stop budgeting altogether or splurge in areas that aren’t true priorities.
Also if you are still treating yourself with some things that you really enjoy, it should be easier to limit yourself even more in areas that are less important to you.
Dangers Of This Thinking
Like many good things in life, this strategy needs to be done in moderation. It needs to realistically fit into your budget too. If you overspend on things you consider a priority, your budget will suffer.
For example, travel may be a high priority, but you’re sure to make a mess of your finances if you are constantly traveling when you cannot really afford it. Instead you should be doing closer to home traveling and limiting the number of trips.
Or lots of small rewards can also easily eat up your budget. If something like good food is a priority, you probably can’t afford fine dining and expensive meals all the time. It would be a good idea to mix in plenty of cheaper meals to even it out.
You really have to find the right balance between rewarding yourself and limiting your budget. Achieving the right balance can be a challenge though. Again it comes down to your personal situation.
What are some expenses that you make a higher priority in your budget? Do you feel that the extra spending in that area helps your overall budgeting efforts?
54 Comments
You’re right. There needs to be something in the form of entertainment as a part of one’s budget. (Even my guru, Gail, agrees with that). The trick is to figure out different ways of meeting those ‘amuse me’ needs without breaking the bank. THAT sometimes takes a bit of work.
Yeah it depends on how expensive your extra needs actually are. Sometimes you also can find other thing that make you just as happy but cost significantly less.
If your budget is so strict that it doesn’t allow for any extras, that will often lead to unhappiness. You would become more likely to stop budgeting altogether or splurge in areas that aren’t true priorities.
This is a great point and I think one that’s often overlooked in the nickel-and-dime approach to budgeting. I know when I’ve been really strict with myself it makes it a lot easier to say “oh, I really *need* this…” latte/scarf/etc, because I haven’t done anything I enjoy in so long. It can’t be all virtuous abstinence all the time!
Exactly. And when you don’t have that kind of stuff worked into your budget, that extra spending can get out of control much easier.
When I first started to get my financial life in order, I was pretty hard core and literally didn’t eat out at a restaurant for over a year.
I eventually burnt out and realized that you have to find some sort of balance. I don’t think we have anything we place as a huge priority in our life…but somebody could probably step in from the outside and point something out. I guess we like to cook and buy healthy food accordingly?
Sure, healthy food could be considered a priority. When some people go extreme with their budgeting they end up avoiding the healthier food because it is more expensive than other options. Glad to hear that you realized how important balance is. It’s easy to assume that we can have super strong willpower when starting out trying to save money.
I agree with Frugal City girl. You hit on a great point that you have to leave a little room for fun in your budget or else you are going to have a much greater chance of slipping and throwing the entire budget out the window.
That’s where you need to think long term. Do you want to save lots for a month or two, or do you want to establish strong financial discipline that can save a ton of money long term? To establish that long term approach you need that room in your budget for fun.
You hit the nail on the head, Jeremy. It’s not realistic for everyone to follow a restrictive budgeting formula that doesn’t address their specific needs or relate to their individual issues. You stated it nicely when you stated, “You really have to find the right balance between rewarding yourself and limiting your budget.” This perfectly sums its up.
You’re definitely right. Some people may be able to pull it off, but most will not need some kind of extra spending to keep themselves happy. That balance goes a long ways.
Everything in moderation — couldn’t agree more on that one, good buddy!
Some people don’t really get that though. They think if they like something a lot, they can find a way to fit it into their budget to excessive levels.
… “This strategy needs to be done in moderation”
I think that says it all! If you cut too deep, then you’ll go crazy not spending any money. If you don’t pull back on the leash sometimes, then the you’ll never save any money either. It all has to do with walking down the middle and finding out what works in your household.
In my family, one thing we really all value are nice vacations. I know most people shrug them off as being lavish or unnecessary. But when we think back to our best experiences over the years, it was during our times of travel. I’m all about the experiences!
Vacations can be the toughest expense to fit into a balanced budget. You don’t want to spend a bunch of money to go on a nice vacation only to have to limit your spending once you get there. So when you need to be more tight with your money, it would be a good idea to space those vacations out more and consider what vacations you can take that are less expensive. Sometimes people are in a rush to explore far off places when they haven’t experienced everything there is to offer right in their own area.
I agree that it is important to figure out what your priorities are and then to learn how to work with them to achieve the best balance between saving money and spending more money. For some people a people a priority may be that they want to buy the latest and greatest sports car, or the biggest house on the block. For others it may be that they are happy to live in a studio apartment, but their priority is to have a nice vacation each year. Great post Jeremy!!
Some of those things may be tough to work into a reasonable budget, but they could definitely be personal goals to work towards. Having those personal goals certainly helps with staying motivated with your budget though.
Everything in moderation, I can definitely agree with that. For example, my top priority is getting out of debt. But at the same time, I want to get married and get a dog. These are huge priorities for me. So instead of throwing everything I’ve got at debt, I’m carving out room in my budget for these priorities as well. That way I don’t feel too deprived.
Those are sure to be worthwhile expenses to fit into your budget. They will likely make you very happy and make the rest of your budgeting much easier to maintain.
My method is to have some periods of fairly strict budgets, followed by a bit of a reward period (while still saving some money). In the eating out case, we’d not eat out for 3-4 weeks, then we’d have a couple of reasonable priced meals out the following week. When you know there is a reward at the end, your lizard part of your brain gets moer cooperative.
That sounds like a good strategy. By depriving yourself in between, you are sure to enjoy those rewards that much more. That would prevent yourself from giving in to all of your priorities too often.
Great post. Being realistic about what will burn you out and what’s important to you are key. My boyfriend really likes our local sports, but most of them aren’t aired on cable. Eventually we just had to cut it…there was no way anymore. We settle for the occasional network-aired game and sometimes he’s able to get away to watch a game at a friend’s or somewhere like that.
Good example of how one’s priorities can still be enjoyed in other ways. He probably felt like he needed to watch a lot more of those games when you had cable, but I’m sure he’ll get used to the reduction. That one could end up costing more the other way though if he ends up watching more games at pubs or getting pizza or beer at friends’ houses.
They key thing is that such an approach allows you to spend more on the things that matter not just less on the things that don’t. Far better than begrudgingly following spending tips and then splurging out on an impulse buy you don’t really want to reward yourself for your hard work.
Yes if you are already rewarding yourself with what you took the time to decide is important, those impulse purchases would be easier to avoid. Most of the time you just wouldn’t be as satisfied with that impulse purchase instead of your true priority.
For me, things that make me comfortable and happy are important. So – living somewhere quiet, taking the train to work instead of driving – that kind of thing I prioritize. I like to read, but owning books isn’t important, so I tend to borrow and use the library. My general goal is – put money into experiences, not stuff!
It sounds like your priorities are luckily things that are less expensive. The experience spending can get expensive, but is usually quite worthwhile.
Well said! One persons priority is not the same as anyone else’s. I hate reading personal finance articles that tell you to drop your cable bill. Maybe some people don’t mind not having television – but I do.
The small daily purchases are what I need to cut.
That’s why it’s referred to as personal finances, because it’s personal. If you like something a lot, you don’t have to cut it out of your spending just because some generic advice tells you to. Spend on what’s important and save in other areas and you’ll be happy.
Vacation expense is something we spend a lot on. Traveling and relaxation is important to us so the expense is something we budget for. We cut corners on other things so we can set aside vacation money.
As long as you can comfortably fit it in your budget that is a good expense. Few things will give you as much long term happiness as the memories created by a good vacation.
A big part of budgeting is setting priorities.. While we are getting our finances in order, I still keep my high speed internet, my cable tv, my data phone, and I still buy a coffee or a six-pack every once in a while. But we very rarely go out to eat, I don’t spend any money on movies or music, and I am paying off debt more and more quickly.
If things got tighter, I would scale back even further. But some spending is definitely required to maintain sanity.
Good point about having room to cut back if things are tighter. If money isn’t really super tight, you don’t need to make your budgeting too extreme. Cut back where you can without sacrificing too much happiness and you’ll be fine.
Hi Jeremy,
I’m also with you and frugal city girl. I used to switch from strict budgeting to splurging and back again when it comes to food.
I would start off with good intentions but after a few days of feeling deprived, I would find myself spending more to compensate.
I’ve finally realized I’m not being realistic so I just give in to my cravings. It keeps me happy for a while and as long I strive to maintain that balance, I’ll be fine.
When you give in to those cravings like that, it probably hurts your overall budgeting willpower. So it’s probably a good idea to give yourself a set budget for splurging on food. That way you are still under control, but also satisfying your personal needs.
Good post… This has swayed me towards taking out that expensive gym membership after all
It sounds like something that you and your wife would really enjoy. Just make sure it comfortably fits into your budget, especially after the splurge on all that furniture for your new home.
If you decide to spend on your priorities, you need to have a strong budget of what you can realistically afford. I enjoy organized sports and it keeps me active. This is a priority, and so I budget approximately the yearly amount I spend on team fees, plus a little bit extra for equipment. If I have any major equipment failures, the difference has to come from general spending money.
I think trying to budget something like that on an annual basis can be tough. It might be necessary with a strict budget though. You do need to take into consideration your specific financial goals when trying to work non-necessities into your budget. Some people want to achieve short term financial goals with very strict budgeting while others want to create long term freedom via better money management. The more long term your budgeting plans, the more room you may need to make for the fun stuff.
No matter what you like to do, whether it is travel, watch sports, or drink beer, there is always a way to maintain that love and lower your costs. Travelling – you can take a trip to a neighboring state and stay at a cheaper hotel. Watching sports – work with your cable provider to cut you a deal. The moment you call to cancel, they will offer you some type of deal.
Good examples James. People often get used to having their experiences a certain way. They may have misconceptions about having those experiences on a smaller scale or with spending less. When they do give the other options a chance, they often realize that they enjoy it just as much.
We’re pretty lucky that, aside from our rent payment and regular monthly and annual giving, our priorities are pretty inexpensive too – a few hundred bucks for gym and some pampering for my wife.
Ahh the wife pampering. Now there’s one area of an budget that is incredibly tough to cut back on. Cut back too much and she’ll assume it’s because you don’t appreciate her enough. It’s also a very worthwhile area to spend on since it is bound to keep both of you happy.
Like some other readers mention, it’s a lot like dieting. You can’t starve yourself. It doesn’t work. You have to search for “bargains” in calories and dollars, to not feel hungry or poor. When you put your mind to it, you can feel satisfied with little meals and little purchases.
Dieting is a good analogy. It’s also all about willpower. The occasional treat can do wonders with keeping that willpower going longer.
We have learned that being realistic with our budget is key. When we have been overly optimistic or haven’t set the right priorities, we have ended up off track. Two high priorities on our budget are vacation and investing. They are both really important to us so we put a good chunk of our money per month towards both. For us being balanced has worked really well.
Investing is always a good priority to have, although it won’t always make you happier, especially when the investment isn’t doing as well. Vacations on the other hand can go a long ways with keeping people happy. That’s great to hear that you’ve managed to find a healthy balance to keep your budget on track.
So true! A few years ago, I decided travel was a priority so I went on several big trips within the span of a few years (even when I was unemployed). They’re the reason I stayed in debt for so long. Now that I’m serious about my debt, I’ve gone cold turkey with no trips for the past year and a half almost and its equally brutal! Moderation, moderation.
That’s too bad that you had to experience both of the extremes to realize that, although I’m sure those big trips were a ton of fun. Complete deprivation isn’t a very good solution if you want to stay happy. Don’t lose focus of paying off that debt, but see how you can work in some trips closer to home or some shorter trips. A trip doesn’t need to be a 8+ hour flight away to be very enjoyable.
Jeremy, you hit the nail on the head about being too stringent in financial management. It’s like dieting. If you starve yourself, it actually causes more damage.
Yes there is no need to starve ourselves. Going too extreme has all kinds of drawbacks. You have to find that healthy balance that fulfills your own personal needs.
Like many PF bloggers, one of my priorities is travelling. I am willing to sacrifice some things in certain areas because it means I am saving for my trip. I am going to Peru this fall to visit Machu Picchu, something I have wanted to do for a few years now. As luck would have it, the travel company had a 2 for 1 deal, so my friend and I are splitting the cost.
Your point:
“Also if you are still treating yourself with some things that you really enjoy, it should be easier to limit yourself even more in areas that are less important to you.” is quite accurate. I believe that is how you find balance in your finances and your life.
A trip to Peru would be pretty cool, especially if it’s a 2 for 1 deal. Personally I don’t travel a whole lot, but I would like to change that when I can afford it. For now I’m making saving and long term stuff a bit more of a priority.
I prefer to save money on big purchases and don’t worry about small ones – it might cost me some money but my state of mind is much healthier.
At first it may seem like there is more money to be saved on big purchases, but that isn’t always the case. Try adding up how much you are overspending on all of those small purchases. It’s easy enough to get in the habit of being careful with every dollar without it hurting your state of mind.