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Living With Financial Clarity

There's no benefit to living someone else's life

❝Intentional living is the art of making our own choices before others' choices make us.❞ -Richie Norton

I spent half my teens and the early part of my 20s working as a cook. For five years, I worked at a local family restaurant, where I made a lot of friends and had a lot of good times. Later, I started working at a larger chain of family restaurants, where I worked for two years. When people ask me about my experiences working as a cook, 100% of the time, I will talk about my first job. Recently, somebody asked me why I never talk about the second job, and it occurred to me it's because I don't have many memories of the second job. I worked there for two years! There were good enough people working there. If I think hard enough, I can even remember workplace friendships. But this was a time in my life when I had a lot going on. I was experiencing a lot of stress and, as a result, was merely trying to survive. I was on autopilot, floating through life without paying attention to it.

I had no clarity about how I was making money, how I was paying my bills, or how I spent my money.


Much of our financial life is on autopilot. Being on autopilot simply means you are making financial decisions – including spending decisions – without knowing you are making those decisions. You are simply unaware. The reason for this is mainly that the pain of paying has been eliminated from our lives. If you made a purchase 30 years ago, it was likely that you made your purchases with cash. In other words, you handed over money to somebody who gave you different money in return (your change). There is no question that you are making a spending decision, and you know exactly how much it was.

Then you started using checks. A personal check is slightly more abstract than cash because the same piece of paper can be used to buy something for $1,000 and $1. Abstraction aside, you still knew that you were making decisions because you had to write a check. Furthermore, you wrote how much your purchase was at least twice and probably three times (if you were tracking your balance in your register).

Then you started using your credit and debit cards. First, you probably had to sign a piece of paper saying how much you were spending. Later, you didn't have to sign if it was under a certain dollar amount. Lately, you rarely have to sign and ask the cashier to throw away your receipt.

Now we link our payment to a system so that when we make a decision, it doesn't even feel like we are making a decision. We just click around a couple of times, and something comes to our door tomorrow. Or we tap our phone a few times, and there is food at our door in 30 minutes.

It's hard to know what's going on with our financial lives if we don't even know that we are making spending decisions. But once we know that we are making decisions, we need to know the consequences of those decisions.

the pain of paying is when we are aware of how much we spend so we spend less


Simply put, a dollar you spend on one thing is a dollar that you cannot spend on another thing. At first read, this might sound very obvious, but the ramifications are more profound than they seem. With every financial decision you make, you are saying "no" to many other decisions because there are countless other ways you could have used that money. Spending $1,000 on a vacation means giving up several thousand dollars in retirement (depending on how long you have for your money to invest). $1,000 on a vacation means you can't use that $1,000 to fix your furnace. Using $1,000 on a vacation means giving up three months' worth of gas for your car. A trade-off is what you are giving up in order to get whatever you're spending your money on.

You might be thinking that you can spend $1,000 on a vacation and fix your heater, and put $1,000 into a retirement account. But all it does is kick the can down the road. Because that $3,000 is $3,000 that you're not going to use to pay down your mortgage, put a down payment on a new car, or upgrade your computer. Life is about trade-offs.

It can be helpful to view your purchasing decisions in this way because it helps you compare real things instead of using dollars, which is quite abstract. When you become more aware of your spending decisions, you'll become more aware of the trade-offs you are making. You will make financial decisions by not only understanding what the trade-offs are but willingly making the decision despite the trade-offs.

To start making the best trade-offs, it's helpful to understand why you're making this decision in the first place.

each decision you make has a trade-off and understanding the consequences of your decisions help you be more mindful

The Five Facet Mindfulness Questionnaire measures your level of mindfulness among five interrelated components. These components are observing, describing, acting with awareness, nonjudgment of inner experiences, and not reactivity to inner experiences. They can be helpful in gaining an understanding of the areas of mindfulness in which you may want to focus.


It's easy to know what you're buying (assuming, of course, you have reintroduced the pain of paying). What's more difficult is to understand why you are buying what you're buying. This question is more challenging than you might think. For example, you might buy a latte at a coffee shop. The first step is to be aware that you made this purchase, but it's helpful to understand why you made the purchase. That's the second step. You may have bought the latte because you were sleepy and needed some caffeine. You also may have bought the latte because you are meeting friends and catching up. You also could have purchased the latte because you need a place to work or study. You can probably think of many other examples.

In her book Loaded, Sarah Newcomb suggests a new take on "needs" versus "wants." Traditionally, "needs" were thought about as a necessity in your life. In this bucket, you would find things like rent, utilities, and car payments. "Wants," on the other hand, were viewed as luxuries. These are things that you don't need. Everything you don't need is classified as a "want." This seems to make sense intuitively at first glance, but once you think about it a little bit more start to fall apart. For example, are groceries a "need" or "want"? True, you have to eat, and therefore it might be a "need." But did you need to buy the specific groceries that you did? Maybe you could have bought generic or nonorganic groceries.

Newcomb suggests thinking about what basic need you're trying to meet with that particular purchase. That is the reason for your purchase. Through her lens, advice that tells you to throw out all of your "wants" and only keep the "needs" misses the point because all of your "wants" are trying to meet one or more needs.

So the magic happens when you understand what your need or value is behind the purchase. Then you can find a more efficient (e.g., less expensive) way to meet the same need or value.

what you buy is the tip of the iceberg, while the reasons for your purchases are hidden below the surface


Now that you know 1) that you are making decisions, 2) what the consequences are of your decisions, and 3) what you're getting in exchange for your money, you are now living intentionally with financial clarity. Living intentionally means that you are living your life in such a way that you are aware of what's going on. You are living on purpose. The opposite is simply existing, sleepwalking through life, floating around from circumstance to circumstance. In that way, you are effectively letting life happen to you instead of taking control of your life.

without intention, you being pulled around by life. with intention you control your life

There's a difference between living and existing.

Choose life.

You get one life; live intentionally.

If you know someone else who would benefit from reading this, please share it with them. Spread the word, if you think there's a word to spread.

Related Money Health® Reading
References and Influences

Adams, Scott: How to Fail at Almost Everything and Still Win Big

Ariely, Dan & Jeff Kreisler: Dollars and Sense

Ben-Shahar, Tal: Choose the Life You Want

Dunn, Elizabeth & Michael Norton: Happy Money

Hagen, Derek: Money’s Purpose in Your Life

Hagen, Derek: Your Money, Your Values, and Your Life

Hanh, Thich Nhat: You Are Here

Hanson, Rick: Hardwiring Happiness

Hanson, Rick & Richard Mendius: Buddha’s Brain

Harris, Dan: 10% Happier

Kabat-Zinn, Jon: Wherever You Go, There You Are

McKay, Matthew, John Forsyth, and Georg Eifert: Your Life on Purpose

McKeown, Greg: Essentialism

Millburn, Joshua Fields & Ryan Nicodemus: Essential

Newcomb, Sarah: Loaded

St. James, Elaine: Simplify Your Life

Wallace, David Foster: This is Water

Ware, Bronnie: The Top Five Regrets of the Dying

Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.


About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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