The Personal Finance Podcast: How to Master the Skill of Spending with Jen Smith

Release Date: December 9, 2024
Host: Andrew Giancola
Guest: Jen Smith, Author of "Buy What You Love Without Going Broke"

Introduction

In this enlightening episode of The Personal Finance Podcast, host Andrew Giancola welcomes Jen Smith, the author of the insightful book "Buy What You Love Without Going Broke." The conversation delves deep into the art of mastering spending—a crucial yet often overlooked skill in personal finance. Jen shares her journey from frugality to value-based spending, offering practical strategies to help listeners align their expenditures with their core values without sacrificing their happiness or financial stability.

Jen Smith's Journey to Value-Based Spending

Jen Smith opens up about her early experiences with debt and frugality. After marrying, she and her husband faced substantial student and car loan debts totaling $78,000. Determined to eliminate their debt, they adopted a strict depriving lifestyle, initially planning to become debt-free in five years. Remarkably, they achieved this goal in just two years by intensifying their efforts. However, this period left Jen with what she calls a "debt payoff hangover," feeling as though financial troubles persisted despite becoming debt-free.

“We never made more than $88,000 in those years, but we went so hard with deprivation that it took a toll on our well-being.” [04:53]

This challenging experience led Jen and her friend Jill to start Frugal Friends, initially focused on saving money. Over time, they realized that frugality alone—saving as much as possible by reducing expenses—wasn't fulfilling. They discovered that spending aligned with personal values was essential for true financial well-being, prompting Jen to write her book as a guide to this new approach.

Value-Based Spending vs. Traditional Budgeting

Jen introduces the concept of Value-Based Spending, which differs significantly from traditional budgeting. Instead of meticulously tracking every expense across numerous categories, Value-Based Spending focuses on aligning expenditures with one’s core values. Jen identifies four primary values that resonate with most people: family, friends, fulfilling work, and faith.

“Everyone has a couple of differences in their values, but we thought for the most part most people share these same four highest values.” [08:04]

Key Differences:

• Traditional Budgeting: Involves detailed tracking and categorization, often leading to a restrictive view of spending.
• Value-Based Spending: Focuses on broader categories aligned with personal values, allowing more flexibility and reducing guilt associated with spending.

This approach encourages individuals to spend thoughtfully, ensuring that their financial decisions support what truly matters to them.

Overcoming Impulse Spending and Psychological Triggers

A significant portion of the discussion addresses the psychological aspects of spending, particularly impulse buying. Jen explains the role of dopamine in the spending process:

“It's not so much the act of getting the treat or for us, the act of shopping, but it was the anticipation.” [13:03]

Strategies to Mitigate Impulse Spending:

1. No Spend Challenges: Engaging in periods where no non-essential purchases are made helps reset dopamine responses associated with shopping.
2. 90-Day Transaction Inventory: Analyzing past transactions to identify patterns and triggers for impulse spending.
3. Developing Coping Mechanisms: Replacing shopping with healthier activities during stressful times, such as exercising or engaging in hobbies.

Jen emphasizes the importance of understanding one’s triggers and consciously choosing alternative actions to satisfy the same emotional needs without financial repercussions.

Balancing Spending, Saving, and Investing

Jen introduces the concept of "Honoring Your Season," recognizing that financial priorities shift over different phases of life. For example, during times of high stress or significant life changes, like having a child or facing a job loss, the focus may shift more towards saving and less towards investing.

“When you're looking at your values, you can definitely maximize the living right now. And then in seasons, when you have more margin, then we can invest how it feels.” [19:44]

Key Points:

• Flexible Financial Goals: Adjust saving and investing strategies based on current life circumstances.
• Prioritize Living Fulfilled Life: Ensure that financial decisions support current life satisfaction while keeping future goals in sight.

Jen advocates for a dynamic approach to personal finance that adapts to evolving personal and financial landscapes.

Simplifying Finances for Better Management

Simplicity plays a crucial role in sustaining value-based spending habits. Jen discusses how reducing complexity in one’s financial life can make it easier to maintain positive changes.

“We want to add, add, add to solve our problems... But time and time again we see that when you take away, you solve a problem much faster.” [34:21]

Simplification Strategies:

• Streamline Financial Accounts: Consolidate accounts to reduce clutter and make tracking easier.
• Limit Financial Decisions: Reduce the number of financial choices by eliminating unnecessary expenses and focusing on essential ones.
• Maintain a Minimalist Mindset: Adopt practices that minimize physical and mental clutter, thereby supporting clearer financial decision-making.

By simplifying their financial lives, individuals can decrease cognitive load, making it easier to stick to their spending plans.

Curating Your Environment and Relationships

Jen highlights the importance of creating an environment that supports financial goals. This includes both physical spaces and relationships.

“We also talk about curating your relationships. So making sure that the people you have in your life are where you are going in your future and not maybe like where you don't want to be.” [36:58]

Curating Strategies:

• Physical Environment: Organize spaces to reduce unnecessary purchases and promote mindful spending.
• Social Environment: Surround oneself with individuals who support and embody similar financial values.
• Setting Boundaries: Learn to say no to social pressures that conflict with personal financial goals, such as group spending activities or gift-giving expectations.

Creating a supportive environment and nurturing the right relationships can significantly enhance one’s ability to maintain value-based spending habits.

Big Impact Energy and Community Influence

Jen shares a personal story about her father, emphasizing how individual financial choices can have broader societal impacts.

“Changing the way you're spending doesn't just affect you, it affects people you'll never meet...” [39:56]

Key Insights:

• Ripple Effect: Personal spending decisions influence broader economic and social systems, such as supporting sustainable practices or fair labor conditions.
• Community Building: By adopting and advocating for value-based spending, individuals can inspire and empower others to make conscientious financial choices.
• Responsibility: Recognizing the collective power of individual decisions to drive societal change.

Jen encourages listeners to view their financial choices as part of a larger community effort towards positive change.

Developing the Skill of Spending

To master spending as a skill, Jen outlines both intangible and tangible steps:

“The first intangible thing to do is to figure out how to look at your spending with neutrality.” [43:05]

Steps to Develop Spending Skills:

1. Neutral Assessment: Approach spending decisions without judgment. Instead of asking, “Why did I spend this?” ask, “What was I trying to achieve with this purchase?”
2. Transaction Inventory: Conduct a 90-day review of all financial transactions to identify spending patterns and areas for improvement.
3. Set Boundaries: Establish clear limits on discretionary spending based on core values.
4. Use Tools: Utilize financial tools and apps, such as Monarch Money, to track and manage expenses effectively.

By adopting these practices, individuals can cultivate a healthier relationship with money and make more intentional spending choices.

Supporting Resources and Tools

Jen recommends several resources to assist in the value-based spending journey:

• Frugal Friends Podcast: A bi-weekly podcast offering tips and discussions on frugality and mindful spending.
• Monarch Money: A comprehensive financial dashboard that helps track all accounts, investments, and transactions in one place. [Mentioned multiple times as a preferred tool]
• Values-Based Budget: Available through Jen and Jill at @frugalfriendspodcast.com, providing a structured approach to aligning spending with personal values.

Listeners are encouraged to explore these resources to further enhance their financial management skills.

Conclusion

Jen Smith’s insights on mastering the skill of spending offer a transformative approach to personal finance. By shifting from a frugal mindset to one centered around value-based spending, individuals can achieve financial stability without compromising their happiness or personal values. The strategies discussed—ranging from understanding psychological triggers to simplifying finances and curating supportive environments—provide actionable steps for listeners to take control of their financial lives and foster a more fulfilling relationship with money.

“It is progress over perfection. It’s about learning and making a better decision the next time.” [52:28]

Jen’s emphasis on progress over perfection serves as a reassuring reminder that financial mastery is a continual journey, encouraging listeners to make consistent, value-aligned progress rather than striving for unattainable perfection.

Key Takeaways:

• Value-Based Spending: Align your expenditures with core personal values to ensure money is spent on what truly matters.
• Psychological Awareness: Recognize and address the dopamine-driven anticipation of spending to curb impulse purchases.
• Flexibility: Adapt your financial strategies to honor different life seasons and changing priorities.
• Simplicity: Simplify financial tracking and decision-making to reduce cognitive load and sustain positive habits.
• Community Impact: Understand that individual spending choices can collectively drive broader societal change.

For more information on Jen Smith’s book and to access additional resources, visit buywhatyoulovebook.com and subscribe to the Frugal Friends Podcast.