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Assets, Experiences, and Indulgences

Nothing makes my way of thinking about it the one correct way, but I think of money spent as three different things: Assets, Experiences, and Indulgences. I do this because it helps me create rules and guidelines for how to spend my money so that I can do well in the long term without having to micromanage finances.

Assets are things that should be worth something significant in the future. Maybe more, maybe slightly less, but nothing consumable or with huge expected depreciation. Examples would be certain high-end watches, art, gold bars, or real estate. Even my motorcycle would count, only because I waited to get a really good price on a used one, and it's still worth the same as when I bought it. I also count anything that will directly affect my productivity. I just sold my last laptop for a $900 loss, but I made a lot more than that with it over the two years I owned it.

Experiences are obvious things like travel and visits to museums, but I'd also count dinner with some good smart friends. My defining line is that an experience is something that has some reasonable potential to impact me long-term. I don't expect that every time, just as I don't expect every asset to increase in value.

And everything else is an indulgence. I choose this word intentionally because it has a negative connotation in my mind. I don't think that any of us can or should go without indulgences, but as the lowest ROI spending, a bias against them can be helpful.

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