Introduction
Personal finance is often perceived as a straightforward discipline, with principles such as spending less than you earn and paying off high-interest debt. However, many individuals struggle with their finances, which can be attributed to various mental, behavioral, and social factors. In this article, we will explore a method to gain control over spending behavior by evaluating expenses through the lens of priorities, using Benjamin Franklin’s wisdom on spending as a guide.
Ben Franklin’s Wisdom on Spending
In Benjamin Franklin’s writings, he emphasized the importance of distinguishing between necessities, conveniences, and superfluities in life. Necessaries are essential items, conveniences are things that make life more comfortable but are not essential, and superfluities are luxuries that should be avoided. Franklin advised limiting spending to necessities and saving the rest. He warned against the dangers of pride, vanity, and accumulating debt to finance unnecessary luxuries.
The Role of Beliefs and Notions
Authors Lynn G. Robbins, Dennis Web, and Lisa Vermillion further expand on Franklin’s expense classification in their book, “Uncommon Cents: Benjamin Franklin Secrets to Achieving Personal Financial Success.” They introduce two concepts for prioritizing expenses: the Belief Window and the Spending Window. The Belief Window represents an individual’s current beliefs about money, shaped by various internal and external factors. The Spending Window helps individuals evaluate their expenses and desired purchases in relation to their priorities.
Ranking Expenses: Vital, Important, Nice, and Worthless
To gain a clearer understanding of their spending choices, individuals can use a matrix called the Franklin Spending Window. This matrix allows them to classify and rank their expenses, purchases, and saving needs into four main categories: Vital, Important, Nice, and Worthless. Vital expenses are life-sustaining necessities, while Important expenses are things individuals feel they need but can live without. Nice expenses are luxury items that would be nice to have, and Worthless expenses are a waste of money.
By categorizing expenses in this way, individuals can see the big picture of their current and future expenditures. This perspective can significantly impact their perception of potential expenses or purchases, helping them control spending and save more money. The authors also emphasize the principle of delayed gratification, which involves moving items from the present to the future or deprioritizing items from Important to Nice.
Implementing the Spending Window
To implement the Spending Window approach, individuals need to create a list of their expenses, planned purchases, and saving requirements. They can allocate each item to the appropriate category based on its priority. For example, individuals should prioritize Vital expenses, such as groceries and utility bills, before allocating funds to Important or Nice expenses. Saving for retirement or building an emergency fund should be considered Future Vital expenses.
It is crucial to bring spending behavior into conscious awareness to gain control over financial decisions. This exercise helps individuals develop self-control and self-restraint, contributing to personal growth and character development. By implementing the Spending Window approach, individuals can make conscious, wise decisions about their finances.
Conclusion
Personal finance is more than just following basic principles; it involves understanding the mental, behavioral, and social factors that influence spending behavior. By using Benjamin Franklin’s wisdom on spending and implementing the Spending Window approach, individuals can gain control over their finances. Evaluating expenses through the lens of priorities allows individuals to make conscious, wise decisions, ultimately leading to financial stability and personal growth.
