The Six Reasons We Spend Money – Part 1

In a recent post I talked about different types of expenses and used a container of mixed up screws, nails, washers, nuts and bolts etc to describe some people’s finances.

I also said that sorting out finances is not as simple as sorting out nuts and bolts that have been mixed up. Nuts and bolts are really easy to identify and put into separate containers but expenses can be sorted in so many ways it’s not so simple.

If you missed that post you will find it here…. Do-your-finances-look-as-screwy-as-this?

Since writing that post I decided to see how few expense types I could come up with that would identify every reason we spend money.

I figure if I can make it easier for people to understand where their money goes and why they spend it they will have more choice and more control around where and when it get’s spent.

So, I got it down to just six expense types!

Over the next few weeks I am going to reveal all six. If you think I have missed something once you have read them all I’d love to hear your thoughts!

#1. – Weekly Expenses – Food, Fuel, Fun and Incidental expenses

I don’t think I need to go any further in identifying these expenses. We all have weekly living expenses.

 Of course you could break them down into groups such as essential vs non-essential or needs vs wants if you wanted to. E.g. Chocolate is food and some people buy it every week. Whether it is essential or non-essential or food or fuel, incidental or something else really doesn’t matter for the purpose of my six expense types so don;t worry. This will all make sense as it unfolds!

Where to keep money for these expenses

I recommend you set up a ‘Day2Day’ Account that has Debit Card and ATM access. Using a separate account makes it really easy to create predictability around expenses that might otherwise seem to be varied. You are putting a barrier in place to stop yourself from accidentally messing up your finances over the longer term.

How to manage this money

Set up an automated weekly deposit to your Day2Day account and allow yourself to spend all this money each week.

If you spend up big on Food one week, then you’ll have less to spend on Fuel or Fun but you should commit to spending no more than this amount on these expenses each week. If a minor incidental unplanned expense occurs this is where it is financed from so be careful not to spend all the money on the first day of the week!

You know this money will be there at the same time each week so it can be relied on and if you don’t spend it all one week the surplus will add to next week’s allowance.

Next time we’ll look at my second expense type.

Have a great week-end and keep an eye out for the next installment!

David Wright