Kill It: Earmark your money and give it purpose
Imagine sitting around your house twiddling your thumbs. Literally doing nothing. Void of anything meaningful in your life, hardly a reason to get out of bed in the morning. This sounds like a life without purpose, doesn't it?
This article is a part of the Kill It! series of articles aimed at streamlining your life into a well-oiled machine.
It sounds awful. And truthfully, it is. We all want a purpose in life; something to strive toward; a reason for getting up in the morning. Otherwise, life just sucks. Big time sucks.
You wouldn't dare live your life without purpose, meaning or direction, would you? If you're like me, the answer is a resounding hell no!
Now, think about your money. What if your money didn't have a purpose? What kind of life is that for your hard-earn dollars? Imagine all those sweet benjamins sitting in your wallet or bank account, lookin' around, wondering where they'll be spent next. Without purpose, your money gets sentenced to the exact same dismal future as you. No direction? No action.
Damn, what a gigantic waste of resources!
Give your money purpose
Your money absolutely needs a purpose in life, just like you. A reason for its existence. You're not just going to work to earn a paycheck. If you're like most of us, you're at work to earn a living. To provide for your family.
Even if you love your job, you aren't just there to do it - unless, of course, you are financially independent and can quit at any time, like a bad ass.
This reminds me of the story of, well, me. In 2004 I graduated with a degree in information technology. I moved to a bustling metropolitan area, got a job and started earning money. At $55,000 a year right out of college, I was pulling down a respectable salary for someone my age.
I had no real experience with earning money at the time. At least, not that kind of money. My previous high school work included grocery stores and camera shops, hardly earth-shattering paychecks.
In other words, I was only experienced with earning small paychecks without a lot of expenses. My first job out of college was also my first exposure to pulling in some serious green. And naturally, I wanted to spend it. Finally, I had a decent income. I was rolling in cash.
About a month after I started my job, I bought a Corvette. Not just a Corvette, but a convertible. Hah! What a ride. It was white with a black ragtop. I treated that sucker like my baby. I upgraded the Vette's wheels and tires, installed a loud exhaust system and even, years down the line, slapped a supercharger on that baby. It was the baddest and loudest car this side of the Mississippi (okay, maybe just my area, but still...).
But, it wasn't just loud.
That car pulled more than $50,000 out of my bank account, easily. I sunk money into it every chance I got. Those upgrades just had to be done.
Oh, and expensive camera equipment. And restaurants every single day. Anything I wanted to spend money on, I spent it. It was there for the taking.
I had a problem - but it wasn't a spending problem.
The root of the problem was my money had no purpose. No reason for sitting in my bank account. No earmark. It just sat there, available. Crisp and smelling like success. I wasn't doing anything else with it. Why not spend it?
Have you ever heard the phrase "We fill the space we have"? It means that if we buy larger homes, we tend to fill those spaces with stuff - whether we actually need that stuff or not. If we buy smaller homes, we fill it with less stuff. In other words, we don't need most of the stuff we have.
In the same vein, we spend the money we have. If it's there, we spend. It's fun. Especially if it is not earmarked for something bigger and better.
...especially if it has no purpose.
How do we give money purpose?
We give money purpose by understanding what we want out of life; our goals and ambitions. Do we want to be working until 70, or would we rather quit at 50 and travel the world? How about after retirement? Do we want to try our hand woodworking? Statue-carving? Basket-weaving?
There's just so much out there to try when you don't have a full-time job constantly tugging at your heart and mind.
In other words, what do you want to do? If you had $10 million bucks right now, where would you go? What would you do? Chances are your money's purpose coincides very closely with how you just answered those questions.
Here's the secret: Your money's purpose equals your purpose.
How do we earmark our money?
Earlier, I said that if our money is available, we spend it. You might be asking yourself how we make that money "unavailable".
We do that by earmarking it. Earmark the heck out of it.
The easiest way to earmark your money is to use automation. If your goal is early retirement, automate transfers from your paycheck into your company-sponsored 401k plan. Your company might also match a portion of your contributions, giving you completely free money to help reach your money (and life) goals. And, 401ks reduce your taxable income, too. Gravy on both ends of that train! Hop on and enjoy the ride.
Automated transfers from your checking account into a savings account is another way to make this earmarking process quick and easy. Multiple savings accounts provide more granularity between each purpose of every dollar saved. A single larger savings account can (and does) work, too.
Here's the key: When we earmark our money and use automation to push a portion of our income away from our checking account, we remove the temptation to spend it. We can't spend what is unavailable to us, right?
"But it's right there in a savings account! I can access it at any time!" you might say. Yes, you can - but if you take the additional steps to access money from your savings account for stuff that hinders your life's purpose, then you are actively sabotaging your future self. Shame on you!
Kill It exercise: Fill in the blank
In this exercise, try this. Read the following paragraph and fill in the blanks with your [honest] answers. Then, read it out loud to yourself. Are you happy with how it reads?
My name is _________ and my purpose in life is _________________. Right now, my biggest expense (other than mortgage or rent) is ____________, which directly supports / hinders (circle one) my purpose in life. I earmark about __ percent of my earnings each month to directly support my purpose.
Note that there is no right or wrong answer to this exercise. Instead, this is designed to get you thinking about your life's purpose and, as a result, your money's purpose. Are you earmarking your money to support your goals and ambitions, or are you spending it on expensive cars, big homes or other things that do little to support your purpose in life?