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Finding Financial Balance

This is a guest post from J.D. Roth, who blogs about money at Get Rich Slowly.

Over the past few months, I’ve been wrestling with the role of money in my life.

jdrothbwwide.jpgFor more than a decade, I was buried in debt. My relationship with money was poor. I earned a decent salary, but I could not seem to get ahead. I lived paycheck-to-paycheck on $40,000 a year.

Often I’d find myself standing in a store, holding a stack of CDs, say, or maybe several magazines. Inside, I’d be arguing with myself, almost as if there were an angel on one shoulder and a devil on the other. Most of the time, the devil won. I’d buy the stack of CDs or the magazines. And I’d use credit to do it. I was a compulsive spender.

Eventually, two friends helped me to realize the path I was on. I began to read personal finance books, I started a personal finance blog, and I converted to the “religion” of frugality. I learned to pinch pennies.

This new-found thrift was exactly what I needed. It helped me to get out of debt and to begin building wealth. I even opened my first savings account, and have now built a sizable emergency fund. Best of all, I’m maxing my retirement savings every year.

Going to extremesbalancedrocks.gif
But something happened along the way. As I converted from spendthrift to, well, thrift, my relationship with money changed — but it didn’t improve. I went from a man who spent too much to a man who spent too little.

Again, it took outside intervention for me to realize I had a problem. Writing at Get Rich Slowly last year, I complained about the cost of movies. I complained about the cost of milk. I complained about the cost of hot chocolate. “You’re not being frugal,” my readers told me. “You’re being cheap.”

That was a wake-up call. I realized that I was still struggling to develop a healthy relationship with money. I had not achieved balance.

And balance is what’s required. I believe that thrift is a virtue, and I don’t intend to abandon it. But thrift can also be a vice if taken to an extreme. It’s not wrong to spend money on yourself, if you can afford it. Money is a tool, and it should be used to bring us joy, when possible.

The balanced money formula
One tool that I’ve embraced since last autumn is the balanced money formula from Elizabeth Warren and Amelia Tyagi in their excellent book, All Your Worth: The Ultimate Lifetime Money Plan.

Here’s what it looks like:


As you can see, when your financial life is in balance, you’re allocating enough for savings and needs, but you’re also setting some aside for the things you want.

This idea is simple, but it was a revelation to me. No more spending too much on wants, but no more pinching pennies, either. I’ve begun to allow myself to spend more money on myself lately, and my mental balance has improved substantially. (Note that my spending is not extravagant; I can well afford these indulgences.)

More than money
For me, the quest to achieve financial balance is about more than money. It’s also about meaning. Money is important, yes, but it’s not the only thing. Recently, I’ve been too focused on my finances. This is probably because I’ve spent the last three years writing about money every day! Whatever the case, I’m coming to realize that money is a means, not an end.

mistydock.gifEach of us has parts of our lives that feel unbalanced. When we experience this lack of equilibrium, it’s important to do something about it, to make changes. From my experience, however, the most effective changes are small — they’re incremental. When we overcompensate for an imbalance, we sometimes just make ourselves miserable in a different way.

How do you seek financial balance? Do you have any tools or techniques that you use? For you, what’s the relationship between money and meaning? How do you measure success?

You may also enjoy:

How to Create Wealth, How to Keep Wealth

Measures of Success

Pursuing Fortune and Fulfillment with Blogger Extraordinaire J.D. Roth

7 Comments to Finding Financial Balance

On Mar 5, 2009, Cindy Marsch commented:

As I asked J.D. a couple of times on his own blog, where is the GIVING? That’s part of financial balance, too!

On Mar 5, 2009, Daily Links: Calm Before the Storm Edition ? Get Rich Slowly commented:

[…] I recently contributed a guest post over at Soul Shelter about finding financial balance. This is another meditation on themes we’ve been discussing here at GRS, about exploring the […]

On Mar 5, 2009, NZ Chick commented:

Re Cindy – I would think the giving part is completely personal and comes under wants. For instance I often give my spare change to charity collectors on the street out of my ‘want’ money, but I don’t set aside a particular amount from my budget. For me its more important to make sure my bills & debt are paid off faster.

I also believe that giving does not have to be monetary – I give my time up to help run a sports club and help coach etc – that to me is more valuable in my community than giving a monetary contribution from which I’m not actively involved.

On Mar 6, 2009, Robin D. Layton commented:

For me, who is celebrating the paying of the last of the credit card debt, it is important to give something back to my charity. I have always felt that giving is a part of feeling like I have more than enough things already. It gives me a feeling of richness. But, I may be at a different place in my financial and personal growth. For the last 7 years I haven’t had any focus but getting out of debt. I would get out of debt then charge my way back into it.

I compare it to my journey in getting rid of the nicotine/cigarette habit. It takes a lot of falling down before you figure out how to balance yourself. And I am just now learning to save and how not want so many things that I jump back into debt. Instead of thinking about all the ways to spend money and things I could buy once out of cebt I am concentrating on a mantra of, “I am enough, I have enough, I do enough.” When I get that emergency fund saved I will then think about letting loose enough to spend 30% on some wants. But I haven’t been cheap to the point of worrying about the cost of a coffee in a coffee shop either.

On Mar 6, 2009, by Tim commented:

Cindy and NZ, thanks for thoughtful reminders about giving.

Robin, congratulations on paying off your debt! Socking it away soon becomes a much greater pleasure than shopping it away ever was.

And I love your mantra, think I’ll borrow that as I watch my 401(k) become my 201K …

On Dec 7, 2009, Financial Balance Lets You Enjoy Tomorrow AND Today- Financial Eyes & Ears commented:

[…] 11th of a 13-part 14-part series that explores the core tenets of Get Rich Slowly. It originally appeared at Soul Shelter in a slightly different […]

On Sep 19, 2010, if its better to be happy than rich – vandatech.com commented:

[…] its important to save and invest to reach your own personal fum goal. Of course there is always a balance and personal preference is a large part of […]

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