This week’s top reads are all about purposeful spending and saving your money mindfully. In the personal finance section, Blair duQuesnay encourages us to evaluate whether we are spending purposefully and in such a way that brings us joy. Michael Kitces talks about how to save for retirement when there is no money left after our bills are paid. And Joe Pinsker shares how he deliberately increased his “pain of paying” to spend less.

In the personal interest section: Scott Duffy has six tips for entrepreneurs who want to avoid costly mistakes and Harvard Business Review debunks the importance of team building exercises with an interesting study.

For more articles like this, check out Raghav’s two previous Top Reads articles here and here.

Personal Finance

Purposeful Spending

Blair duQuesnay of Ritholtz Wealth Management began thinking about purposeful spending after reading Brian Portnoy’s, The Geometry of Wealth. In this article, she drives home the idea that our spending should make us happy (beyond “keeping up with the Joneses”) and this means something different for everyone:

Everyone has different preferences. That’s a good thing because it ensures variety in the products and services offered by companies. What brings you joy will not necessarily bring joy to your neighbors.

duQuesnay closes by encouraging us to evaluate whether our current spending habits bring us joy. Do you currently have an expense that will end up costing you thousands of dollars over the next few years? Read the full article here and see if you can identify an item you’re paying for that is no longer in line with what makes you happy.

Why (Prudent) Spending Rates Matter More Than Savings Rates

If you’re trying to save 10-15% of your income for retirement but find your money is spread too thin to scrounge up those extra funds after the bills are paid, this article by Michael Kitces is for you! The rate at which you save is not the issue in this scenario, it’s actually the rate at which you spend that needs to be examined:

The distinction is important because for households where the fixed spending rate is relatively high (e.g., lower-income households or those in higher-cost-of-living areas), trying to focus on cost-cutting savings isn’t likely to have much impact anyway because there’s not a large enough percentage of the budget that is discretionary and flexible to really matter.

Kitces explains that the best way to increase our retirement savings is to earn more. For this excellent and thorough article, click here.

One Simple Financial Change that Lowered My Spending

In this article, Joe Pinsker explains how he used behavioral economics on himself to decrease his spending. Once Pinsker learned about the “pain of paying” (i.e. when we use credit cards we don’t tend to feel upset about parting with our money because we delay payment and often have rewards programs that help us to justify our spending; when we use cash our level of upset it high, because our decreased funds are tangible) he attempted to increase his pain by implementing a rule for himself. Each time he made a purchase, he would log the item and the cost into his phone in an effort to make stronger connections with what he spent his money on. The result? Pinsker’s discretionary spending dropped between 10 and 15% within the first five months of using this system for his spending.

For the full article, including other interesting ways to increase your pain of paying in order to spend less, click here.

Personal Interest

Developing a Business Model That Works

According to Scott Duffy, most entrepreneurs change their business models six times as they work through the financial part of their business plans – if they even make it that far!

The most important part of the initial business planning process, and the one people most often neglect, is getting your numbers to tell a story that makes sense for you and your investors. If you start at the beginning of the plan only to learn that your assumptions about the business don’t add up once you reach the end, you’ve lost valuable time and money.

In this article, Duffy shares six tips for avoiding costly mistakes as an entrepreneur. Among them: start with the last page first, be careful who you listen to, and get yourself out of the office.

For the full article and all six tips, click here.

Stop Wasting Money on Team Building

Many companies pride themselves on their commitment to providing team building activities for their employees. However, these activities may not be as valuable as you’d think. Harvard Business Review performed research on team building in an effort to understand how to maximize team effectiveness. What they found was that employees were focused on their individual strengths and how they personally connected themselves to meeting the business’ objectives.

It occurred to us that their failure to collaborate was, ironically, a function of their excelling at the jobs they were hired to do and of management reinforcing that excellence. Collaboration, on the other hand, was an idealized but vague goal with no concrete terms or rules. What’s more, collaboration was perceived as messy. It diluted accountability and offered few tangible rewards.

To read about HBR’s study and other findings, click here.


GuideVine

GuideVine

From time to time, the team at GuideVine highlights certain topical videos and content from expert financial advisors. We find these helpful and hope you will to for your managing personal finances. To learn more, you can view and find potential advisors through our advisor matching service and listings, ask one-on-one personal finance questions to these experts, and view “How to” videos on our YouTube channel (https://www.youtube.com/channel/UCJopbGDSgc1szGZaoUPqTrA).