Spending money

There’s one basic rule to live by when it comes to personal finance: spend less than you make.

Spend less than you make. Sounds easy, right? But as you may know from watching friends and family members, it’s actually not as easy as it sounds for a lot of people. We all face temptations to blow our money on things that may not matter much to us in the long run.

If you want to make your money go far, you’ll have to learn to spend it wisely. Here are a few things to take into account: 1. Energy spent. Think of purchases not in terms of dollars, but in energy spent. Are those new $100 headphones worth seven hours of babysitting or five lawn mowing jobs? You may look at purchases in a new light when you view them this way. 2. Cost vs. value. There’s a difference between being cheap and being thrifty. Being thrifty is a good thing—it means spending your money wisely. Being cheap can be counter-productive. If the new skateboard you want to buy is better quality than the others and will therefore last longer, it may be worth the extra cost. Buying cheap can sometimes mean spending more money down the line on maintenance or replacement.

3. Do you need it or do you want it?

If you break it down, you’ll see that everything you buy is either a need or a want. If you have to buy it (think bus fare, textbooks and basic clothing) it’s a need. If you choose to buy it but it’s not absolutely necessary (another brand-name hoodie or tickets to a concert), it’s a want. There’s nothing wrong with buying something you want now and then, but not if it means going into debt or being unable to buy something you need.