Welcome to the first episode of the Healthy Rich podcast, a show about money for misfits!
I’m Dana Miranda, a financial educator and author of You Don’t Need a Budget.
In this (re)launch episode, I’m answering the No. 1 question I get when I tell people “you don’t need a budget”: How do you avoid spending money you don’t have?
My answer will probably vex a lot of people, but I stand by it. I get into:
🥑 The three dimensions of financial wellness that can inform how you use money.
🥑 Why debt isn’t something you have to avoid!
You can always follow the podcast right here via email or Substack, or you can subscribe in your favorite podcast app. The transcript is below. Enjoy!
Transcript:
Welcome to the Healthy Rich podcast, a show about money for misfits. I'm Dana Miranda, a certified educator in personal finance and author of You Don't Need a Budget: Stop Worrying about Debt, Spend without Shame and Manage Money with Ease.
In today's show, I'm answering the number one question I get when I push back on budget culture: Without a budget, how do you avoid spending money you don't have?
The No. 1 question I get when I tell people you don't need a budget is, how do you avoid spending money you don't have? I think that fear is at the heart of why so much financial advice starts with restrictive budgeting. A lot of people start a budget because they have this idea that they can't trust themselves not to overspend, or they're afraid that they'll waste money by spending it on the wrong things. And I want to shift the mindset behind this question.
I believe you can't actually spend money you don't have — the money is literally not there, so you can't make that transaction. So when you're spending from cash that you have on hand or money that's in your bank account, you're just making a decision about how to use money one way or another.
So what I hear people actually asking when they're saying, How do I avoid spending money I don't have, is, how do I avoid spending money the wrong way, or, How do I avoid debt, and my answer is that neither of those things needs to be avoided.
So let's break down each of these questions.
The first one, how do you avoid spending money the wrong way?
So spending money one way necessarily means not using it in another way. You could have spent it on something else. You could have used it to pay down debt, or you could have saved it for the future. So any time you're using money, you're making a financial decision, and you're thinking about those kinds of trade offs.
Budget culture keeps us constantly afraid that we're making the wrong decision. It gives you a set of rules for how you should be spending your money, and it tells you that it's probably not the way that you are spending your money or the way that you want to. But I promise you, you can't spend money the wrong way. You get to decide how you use your money, and you can trust yourself to use it in the way that's best for you.
If you're constantly worried about spending money the wrong way, you're probably weighed down by a bunch of budget culture expectations that are telling you what you should be doing with your money, and again, it's probably not the thing that you are doing or want to do with your money.
So to break out of this budget culture mindset that you can't be trusted to make decisions about your money, I recommend that you stop looking to this outside set of rules and boundaries and instead start looking inside yourself to decide how you want to use money in a way that's right for you. To do that, to start to quiet the budget culture noise and determine what actually feels right for you in this culture where we've really not been taught to think that way, I recommend considering three dimensions of your financial wellness when you're making any kind of financial decision.
I call these three dimensions head, heart and health.
So head is the thing that personal finance tends to be focused on. These are financial goals. We're looking a lot at the numbers. We're looking at things like interest. It's a lot about optimizing things financially. These are the things that fit easily into spreadsheets and budgets.
The heart is your values and passions. So thinking about how your spending is supporting things that you're passionate about, thinking about the ways that you're earning money to support your passions and making sure that the ways that you spend money are in line with your values.
Health is thinking about your physical and mental health and well being and your best interests. So these are the things that add comfort and joy to your life.
Personal finance as a whole has generally been preoccupied with things that serve the head. We're very focused on numbers and spreadsheets and budgets and optimization. In recent years, we've expanded to consider the heart, values and passions, a lot more to think about finding work that's in line with your passions, to think about spending in a way that's in line with your values. But by and large, personal finance media and education have ignored health and well being. We have looked at those things as comforts and luxuries that can be easily set aside in order to better serve the financial goals.
But my argument is that any financial decision needs to serve all three of these dimensions, the head, heart and health in balance. If it's not serving one of those three things, it's not really serving you and it's not really in your best interest. So for example, you can make a decision that you don't want to save based on some arbitrary percentage that a personal finance expert tells you, or you don't want to make debt repayment a priority, no matter how much debt you have or how much you might accrue in interest. Those decisions could be right for you, even though they don't feel like they serve the head 100% and align with some arbitrary personal finance goals that you're being told about.
This doesn't have to mean not having financial goals like that. For example, I recommend having a comfort fund, which, as you're building it, you might be setting an amount that you want to contribute each month, or you're setting a goal that you want to reach. That's a very financial goal that serves the head. But having a comfort fund can also serve your heart, because it can help you make decisions in life that are in line with your values, like It can give you the comfort to choose work that is in line with your values or supports your passions. It can help you make changes in life to better pursue your passions. And it can also serve your health and well being by reducing your financial anxiety. So something that is often presented as strictly a personal finance goal that would serve the head, you can also consider how it serves these other dimensions of your financial wellness in balance.
So here's another example that's more focused on spending. If you need to buy a new couch, how are you going to make that decision?
A decision that serves solely the head would say that to stick within your budget, you need to find the cheapest couch possible, the lowest cost. And so you might go to Amazon and buy one of those assemble-your-own-couches that gets delivered to your door because it's the lowest cost that you can find. And that would serve the head; it would reduce the amount of money that you're spending on the couch, which could serve your budget. But it might not serve your heart, if your values aren't in line with Amazon as a company. You might not share their values and agree with their labor practices or their corporate practices. It might not serve your health if that piece of furniture is uncomfortable and it just makes you less comfortable in your space day to day.
So in making that decision — and these are the kinds of decisions that people make day to day. Budget culture sort of allows for some of them and doesn't allow for others. And I think that you can make all of your spending decisions in this in the same way that you choose a couch that both fits into your budget and adds comfort to your life — So in making this kind of financial decision, think about how you can balance the needs of your head, heart and health.
So to wrap up, this question of, how do you avoid spending money the wrong way? The simple answer is, you can't spend money the wrong way. So if you're having trouble making a financial decision, try to step back, quiet the noise of budget culture and think about how this decision can serve your head, heart and health in balance.
So let's talk about the second question, how do you avoid debt?
The only other way to spend money you don't have is to use credit cards or loans and take on debt. I argue that doesn't have to be avoided. Debt isn't a moral failing, it's just one more resource available to you, so you can choose how you use debt, just like you choose how to use any other resources, and I recommend seeing it in line with other resources that you have available to use or spend however you want, just like income that you earn From working, money that you get from community resources or government benefits assets that you own, debt is just another line item that you can use to expand the resources available to you so that you can use money in the way that feels right for you.
Of course, budget culture puts a lot of shame on using debt. There is definitely some work that people have to do to shed this shame, and we can't do that all in the course of this conversation, but I do want to acknowledge that this is kind of a lifelong project to shed the shame coming from our culture and the messages that we're getting through budget culture.
But I do want to say that it really is just as simple as this: Shed the shame that you have about using debt and see it as a resource available to you, so you don't have to avoid using it and reduce the resources available to you unnecessarily and make your life smaller than it could be.
So of course, the next question then, if you're going to use debt products without shame and without restriction, is, how do you deal with that debt that you end up carrying? That's the next big fear that people have and why people want to spend less and avoid taking on debt.
But I think that you can do it without the enormous burden of stress that we often feel around debt by just understanding how your debt products work and understanding the consequences or outcomes of various decisions that you can make around that debt, instead of looking for ways to spend less so you can avoid debt, or even once you have it, optimizing to pay off the debt as quickly as possible. Understand how your credit cards or loans, or whatever it is that you have, understand how those products work, so that you know what options are available to you.
So how does your credit card interest work? When do you get charged fees? What are your options for repaying a mortgage? What are your options for repaying your student loans? How can you minimize the burden of that debt in your day to day life without focusing solely on what serves the head and reducing the line item of that debt in your budget?
Budget culture wants to frame the existence of debt itself as a burden in your life, and that's why it carries so much shame and anxiety. But it doesn't have to be a burden just for existing. The burdens that I'm talking about are the ways that the outcomes of carrying debt might not serve your head, heart and health day to day. So it might be things like calls from debt collectors, wage garnishment, the effect on your credit score, not having access to credit because you maxed out a credit card, things like that, are ways that the consequences of debt products can make your day to day life harder, and therefore not serve your head, heart and health.
So when you're making decisions about how to use debt and how to deal with it, understanding those consequences can help you ensure that you're making decisions that continue to serve all three of those dimensions of financial wellness. So maybe you understand exactly how carrying credit card debt and paying the minimum balance is going to impact your credit score, but you don't care what your credit score is, because you don't want to open another credit card in the future, or you're not trying to buy a house anytime soon and take out a mortgage, for example. I know that there are a lot of other ways that credit scores are used, and we can get into that in future content, but just understanding how those things work can help you make the decisions that make sense for you, instead of just following an arbitrary rule that says you need to have as little debt as possible and you need to have as high a credit score as possible and not understanding why.
So when I hear people asking how to avoid spending money you don't have in order to avoid debt, I want to reject the premise of that question altogether and instead start from a place of understanding debt as a resource that you don't have to avoid.
So the short answer to today's question, how do you avoid spending money you don't have, is you can't spend money you don't have. Trust yourself to use the resources available to you in whatever way makes sense to you.
Thank you for listening to the Healthy Rich podcast! If you have a question you'd like to see answered in a future episode, you can submit it in writing or as a voicemail by clicking on submit a question for the podcast at the top of the page.
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