With the economic downturn, everyone is cutting back. But are you also re-prioritizing?
This last weekend my wife and I were talking with some close friends about the economy, and how everyone was reducing their spending. Our friends told us how they had completed a total makeover of their family budget. Like most people (including us), they had seen their savings deteriorate, and had been forced to make some material adjustments.
They began by laying out all of their committed expenditures, mortgage and car payments, electric and heat, taxes and insurance, etc. Then they looked at their budget for regular monthly expenditures, such as food (groceries and eating out), clothes, books and magazines, entertainment. Finally, they moved from this "needs" list to the "wants" list. This included toys, jewelry and the annual family summer vacation.
Excluding things they could not eliminate in the short term (like mortgage payments), they ended up cutting across the board by about 10%. As for the "wants" list, they felt that for now, they needed to eliminate nearly everything. Specifically, they told us they had decided to forgo the family vacation this year. This was an easy way to save a significant lump sum from their budget, and it seemed like something they could certainly go without, at least this year.
This led to a discussion about previous family vacations we had each taken. We opened a bottle of wine, and began browsing through pictures of past trips, sharing stories about our adventures, and reminiscing about our kids and the memories these trips had created.
My friend told me about one trip their family had taken 6 years ago. He seemed to remember every detail, down to the expressions on each of his children's faces as they experienced new and exciting things for the first time. I then asked him, "So, looking back on all the things you have spent money on in over the last 6 years, where would that trip rank? What is the value of those memories?"
We both paused.
So many of the decisions we make are based on incremental changes. Our lives rarely change abruptly. Rather, they seem to evolve slowly in one direction or another. We get a raise every other year, and our spending seems to inconspicuously expand to fill the void. We now face a down economy, and we look to incrementally reduce our current spending levels to compensate.
But how did we actually arrive at our current spending levels? Why do we purchase the things we do each month? Is it by conscious choice? When was the last time you honestly reevaluated the priorities in your budget, from the ground up?
How much are you spending, in total, on your automobiles each year? On clothes that you don't wear, and on "stuff" that marketers have convinced you that you need. Ten years from now, how will these purchases really rank against things as simple and irreplaceable as time spent with family, sharing new experiences with them before they grow up and slip through your fingers?
Looking back at our summer vacations, what is so unique is that each trip seemed to crystallize an age the kids would never be again. Our children are now 13, 12 and 11.
But that's just for this year.
So this summer, we have decided to cut back on our family vacation. We are using frequent flier miles to get to our destination, and have downgraded the hotels we are considering. Prepackaged adventures and expensive theme parks have fallen off the list.
But we are going to do something. It may be our least expensive family vacation yet, but that will likely be very hard to tell from our children's faces, or when, six years from now, the memories of our trip emerge near the top of the list of the things we value the most.