Every Dollar Has to Mean Something

Do you know how Warren Buffett always looked at the money he invested?  He’ll tell you himself.  He never saw a dollar invested as simply being a dollar invested.  He saw what the dollar meant in the long-term prospects of his investing career.  It wasn’t just a dollar today.  It was 10 dollars in 20 years.  That made each dollar Warren Buffett invested actually mean something.  And if you’re simply spending money and never thinking about it?  Well then that means you’re not approaching money correctly.  Am I saying that every dollar spent has to be thought of in long term fashion?  Of course not.  The dollar you just spent on a pack of gum shouldn’t be thought of in terms of its value in 20 years.  However, the dollar you spend on that pack of gum has to mean something.  So what do I mean by this?  I’m glad you asked.  To me, there are various types of ways dollars are spent, but it’s how we actually look at those dollars that makes a huge impact on our lives and also our finances.  Today I’m going to look at a few common ways we spend money and share some perspective on how we should be looking at and attributing meaning to that money.

When you are investing money

Before I even get into this I think it’s important to somewhat define what I mean by “investing.”  When it comes to investing money I think it can fall into a multiple categories.  But for the purposes of this article? Investing can mean financially as in for your portfolio or savings, or it could be investing in yourself and others.  There’s no reason to think that paying for education isn’t investing.  There’s no reason to think that paying for a tutor to help your child on their SATs isn’t an investment.   There’s no reason to think that paying for a course that will help you buy and sell real estate isn’t investing.  Catch my drift?  Good.  Now that we’ve got that established, how do dollars mean something when it comes to investing?  In my opinion?  It’s a relatively simple formula.  The meaning of each dollar you spend on an investment is directly correlated to an intended outcome you hope to achieve.  It’s the same thing as spending time.  I once wrote about how watching TV isn’t a waste of time as long as its for a particular reason.  The same goes for money.  This is why they say “time is money.” Because it is, when thought about properly.  So let’s break it down according to the examples I just gave:

  • Investing to save or for your portfolio – This one’s easy.  This is the one where you need to think like Buffett.  Each dollar you invest when it comes to savings or your portfolio isn’t just a dollar.  It represents a multiple of that dollar.  So if you’re putting away 100 dollars you need to think to yourself, “will this become 1000 dollars?”  Each investment decision needs to be based on that long-term view.  Look, I’m not saying you can’t kick ass as a short-term trader or speculative investor.  However, when it comes to money for the long haul?  Each dollar needs to represent a part of your long-term goals.  Again, that’s just my humble opinion.
  • Investing in yourself and others – Here I’m referring to a skill.  If you are investing in a particular course or education or any kind of lesson for yourself, you need to think of that money as a piece in the overall end goal of said skill.  If you want to invest in real estate and you buy a book on investing in real estate, those dollars need to be thought of as part of your eventual real estate portfolio.  If you’re enrolling in accounting classes, those dollars must be thought of as units to acquire knowledge in the accounting space whether it’s for yourself and your own finances or whether it’s to increase your skills to get you a job in accounting.

When you are spending on survival

This one’s pretty obvious but nevertheless it needs to be defined.  The reason is because of educating our youth.  I happen to make a solid living.  A living that by definition puts me in the top 1% of earners in the United States.  I say that not to boast by any means.  I say this because my kids have absolutely zero sense of the concept of money.  They have a lifestyle that’s so far from the norm they just don’t “get it.”  So it’s my job to teach them the value of a dollar.  There’s no better way to teach our youth the value of a dollar than having them understand what “survival” means.  The food in your belly.  The clothes on your back.  And the roof over your head are critical components to living anywhere in the world.  And every single dollar spent towards these ends is an important one.  But it’s also important to remember that each dollar that goes beyond what’s necessary in order to survive should take on a completely different meaning.  It doesn’t necessarily mean you shouldn’t be spending said money, but it does require reflection and analysis before spending it.  So remember, spending on survival is the money that’s spend that’s necessary for you to eat, sleep, and breathe.  Once you move beyond that?

When you are spending on leisure and entertainment

When you move beyond spending money on necessary things as in things you 100% need you then move into the leisure and entertainment category.  However, some of these are gray areas.  For example, is eating always for survival or is it for leisure?  Let’s face it.  Eating a box of candy is most certainly not for survival, but it does have its place does it not?  Let’s say you’ve been eating healthy all week and want a treat.  Should you deprive yourself of that box of candy?  Personally I don’t think so if you can keep it under control.  Therefore using money for that box of candy can count as meaning something.  You’re spending that money because once in a while it’s OK to treat yourself.  And by treating yourself you’re taking care of your mental well-being.  What about going on vacation?  It’s one thing to abuse taking days off and be on vacation 24/7.  It’s another to work your ass off for months at a time and take a necessary breather.  In that case spending money is absolutely necessary.  What about spending extra money on a mattress?  Is it a luxury or a necessity?  Depends how you look at it.  Do you really need a five bedroom house?  Probably not but what if you have excess funds.  Can’t that count as a luxury that improves quality of life?  It can if it actually does improve the quality of your life.   Leisure and entertainment are a gray area that only you can make sense of.  But if you can make sense of them, then it’s money well spent.  The point is, as it’s always been, the reason for spending money has to be completely clear and intentional.  It’s one thing to want to drive a Ferrari to keep up with the Joneses and put yourself into debt by having one.  It’s another to have excess money you don’t need, have always wanted a Ferrari and said Ferrari will bring you joy in your life.

If it doesn’t mean something, reconsider spending it

People spend money for different reasons and those reasons differ for everyone.  For some people it’s important to have status and symbols representing a financial level in life.  For others, it means nothing.  For some, going to the gym and wearing every single piece of athletic gear is important.  For some, it’s not.  Whatever your reasons are, they need to be legitimate reasons to you.  If they are, then you can usually justify spending money on whatever it is you spend it on.  But if you know deep down, spending the money goes beyond what your intended purpose is, it’s probably best to hold onto it.

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