Why Your Spending Matters

It’s easy to feel as though your financial decisions are inconsequential – like you can spend your money carelessly without any serious repercussions. The truth, though, is that your spending habits matter greatly to your ability to live a financially independent life.


We’re going to be covering some crucial concepts to get you started on personal finance. First, let’s talk about what it means to spend money.

An expense is the money spent on something. For example, when you spend money at a store, this is an expense. It’s very easy to have too many expenses. This is where budgets come in.

A budget is a plan which controls your spending. When you have a budget, you can see where you can stop spending money and save more.

Whether you’re in a tight spot or you’re doing great financially, a budget can help you! When you budget, you stop spending money on unnecessary expenditures and this money can be used more efficiently.

In summary: an expense is the money spent on something and a budget is a spending plan which helps you save.

In order to follow a budget, you need to be able to make smart financial decisions.


Do you actually need that new video game, or do you just want it really badly? Sure, you might argue that entertainment is vital to a young person’s life, but it’s much harder to argue that it needs to come in the form of an expensive video game. Some things you need, others you just want. But just because you don’t need something doesn’t mean you can’t buy it as long as you stay within a budget.

Let’s be real. We’ve all made decisions without actually thinking them through. When it comes to financial matters, avoid making snap decisions! Buyer’s remorse occurs when you make a purchase and later regret it, like that double bacon cheeseburger you ordered at 1 AM (don’t deny it).

Beware of impulse buying! Impulse buying is the unplanned decision to purchase something. Don’t fall for this trap. Instead, always think before you buy! When something in the store window catches your eye, don’t feel pressured to buy it right away. At the very least, check for coupons or cheaper alternatives online! Always be mindful of your budget and your “needs” versus your “wants.”

To be financially responsible is to live within your means – that is, to spend less than you make. Whereas financially irresponsible people drop their savings on things they can’t afford, those who are responsible will lead happier lives in the long run. Let Zogo show you how.

If you want to be financially sound, avoid overspending (e.g., always following the latest fashion trends), peer pressure (e.g., keeping up with friends who may have more money to spend than you), and procrastination (e.g., letting your money sit still when it could be working for you).

For now, let’s focus on peer pressure.

Peer Pressure

Peer pressure is feeling like you have to do and buy the same things as other people in your social group in order to be liked by them. However, when it comes to money, not everybody has the same amount. If you try to keep up with some of your richer friends, you will end up in trouble.

An affordable activity for one person may not be affordable to you, but in some social settings, it could be hard to turn down an opportunity to hang out. What should you do? Be honest with your friends, they’ll understand!

The risk of overspending when you’re out with your friends is very high. To avoid this, apply these tips: know your limits, know ahead of time how much you plan to spend; prioritize, you might realize your budget won’t let you attend every party, so choose wisely; and offer an alternative, propose an activity which doesn’t require money!

Consider this scenario: You’re going to see a movie with friends. The ticket was pricey, so you decide to spend less than $5 on popcorn. When you arrive, everybody is spending over $15 and encouraging you to change your ‘small’ for a ‘large’. What do you do? Be honest with them, don’t get upset, and be open about it if you’re saving for a goal!

“Everyone is buying it!” “A once-in a lifetime opportunity…” “This is only available today!” Have you ever bought something not because you really wanted it, but because you felt pressured into buying it? Salespeople will use all sorts of tactics to try to get your money. Don’t fall for it! Instead, slow down and do your own research!

One thing to consider in these situations is opportunity cost.

Opportunity Cost

Opportunity cost is what you give up when making a choice, or a trade-off. If you have $50 and you spend all of it on a video game, the opportunity cost is the next best thing that you could have bought with those $50- a concert ticket, for example.

Every decision you make has an associated opportunity cost. Let’s say you want to take both tennis and dancing classes but you can only pick one. The opportunity cost of taking tennis classes is the enjoyment you would’ve gained from dancing, and vice versa.

After you make a purchase, ask yourself, “what else could I have bought with this money?” and “would I rather have that than what I just bought?” If you often find yourself saying yes to the second question, you should start asking yourself the first question before making a purchase!

You should always keep in mind your financial goals that you are working towards. Sit down and ask yourself what you want to save for and develop a plan that will achieve your goal! (And make sure you remember your goal whenever you make an unplanned purchase and consider whether the purchase is worth it.)

Consider this example: Ms. Brown is a lawyer who makes $500 an hour. She is considering paying somebody to paint her house. If she decided to do it herself, it would take her four hours. Therefore, the opportunity cost of doing it herself is the lost $500/hour of wages for four hours of work, or -$2000.


If you want to be financially stable and independent, it’s important to 1) budget, and 2) make informed decisions independent of peer pressure and with full consideration of opportunity costs. Read our next article for more saving and spending tips!