Priorities

Recently I was talking with a friend of mine who lives in Southern California about the price of real estate. In her town, real estate has not seen much of an impact from the housing burst. For example, the person who lived down her street and listed their property two weeks ago has already sold. The combination of an excellent school system and proximity to transportation makes it an easy target for home buyers. I figured it must also be an inexpensive area, so I asked her what the average price of a home was. The home that sold in 2 weeks was a 20 year old home with 3 bedrooms and 2.5 baths, probably a little over 2000 square feet. Somewhat of a modest home by many standards. The asking price? Just under a million dollars. I nearly fell off my chair, then caught my breath to ask

How can anyone afford to live there?

My friend had obviously been asked this question before because without pause she came up with an answer. It's about priorities. Homes are expensive so you need to give up other things that are less important..

Give up other things like food and toilet paper? Because that's what it would take for Mr. Cents and I to be able to afford a comparable home in Southern California. (Needless to say, she was not amused.)

The conversation led me to think more about financial priorities. It's safe to assume that financial priorities are different for different people - but are many people even aware of their financial priorities? Or do we just wander mindlessly through the store, hoping something we need catches our attention long enough to put it in the shopping cart.

Every time you make a purchase, you vote with your wallet. As long as your spending is in line with your values, you leverage your money to your advantage. The products you choose to purchase have a market and the companies who make them can continue to sustain their business. Trent over at The Simple Dollar had an interesting article this week about an avid traveler who is frugal in all areas of life so she can take long weekend trips to different countries every couple months. It's a wonderful example of spending your money on what is important to you.

Mr. Cents and I have financial priorities that change over time, and I can see patterns in the way we've voted with our wallet. Lately we've been attacking the lawn hard and trips to Home Depot have won over dinners out. We've noticed the change because we evaluate our spending every month (or more) and adjust accordingly. If we've overspent on one category (say, home improvement), we can adjust another category (like entertainment). That's why it's so important to have perspective on where your money goes. Without tracking our spending, we might become mindless spenders and end up not valuing our true priorities. That would put us off track of our long term goals and perhaps impact us in the future. That's not a priority we're willing to endorse.

As long as you know where you're going, you can make a plan to get there.