How to Spend £1,000s Guilt-Free

Every Sunday, I send you something to THINK about, a question to ASK yourself, something to TRY and invite you to SHARE.

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THINK

“Happiness is a state where nothing is missing.”
Naval Ravikant

“F*ck it!“

I click ‘Purchase’ to confirm the order.

£4,000 for a laptop.

Gulp!

Did I really need to spend that much money on a computer?

In short, no.

But it’s much more nuanced than that…

In this week’s Newsletter, I’ll share my thinking behind spending BIG:

Big Spending Made Simple (3 Steps)
When to spend BIG
When to walk away
How I justify spending 20x more on something
How to spend money 100% guilt-free

Are you ready to shamelessly spend?

Let’s get straight into it!

Big Spending Made Simple (3 Steps)

There are multiple things to consider when making a big purchase.

I focus on 3 Steps.

1. Value

Does it add value or remove a defect from your life?

The factors that contribute to something being valuable will vary from person to person.

What’s valuable to me, might not be valuable to you.

I like to buy things that make me:

Money
Memories
Save time
Healthier
Stronger Relationships

I avoid spending money on status, as that tends to decrease the quality of my life.

💡 Are You Buying For Status?

Q. How do you know if you’re buying something for status?

A. You want others to see/know/talk about it.

If you would still spend the money on the item knowing no one would ever see it, know about it or comment on it, it’s likely more for you than others.

So long as you have the money, fill your boots.

If deep down, you want people to see it, know about it or tell you how awesome it is, it’s likely for status, which is a zero-sum game.

You feel ‘good’ for having it. Others either feel bad for not or they simply don’t care.
In time, your ‘special’ thing will become ‘normal’ as you adapt to owning it – AKA hedonic adaptation.
A newer/better version will eventually be released, making you feel inferior. You will now want the newer/better version, and the cycle continues.

Play stupid games, win stupid prizes.

Here is a list of factors that create value in multiple areas:

Function

Does the product or service serve a practical purpose? For example, a tool that helps you accomplish tasks more efficiently.

Quality

The quality of a product or service can determine its value. High-quality items tend to last longer and perform better, providing more utility over time.

Emotional Satisfaction

Some things provide value by fulfilling emotional needs or desires. For example, spending time with loved ones or engaging in hobbies can enhance well-being and provide intrinsic value.

Long-Term Benefit

Some purchases might not pay off right now, they could even cost you, but over time it creates more value. These long-term gains contribute to its overall value. For example, an indestructible item or investing in an asset.

Alignment with Personal Values and Goals

If a product or service aligns with your values, interests, and goals it’s likely to provide more utility in your life. For example, sustainable products or skill development.

Versatility

Products or services that can enjoyed in multiple ways tend to offer more value. Versatility allows for greater flexibility and adaptability to different situations. For example, convertible furniture, a Swiss army knife or a smart phone.

Social Value

Some things provide value by fostering social connections or contributing to the community. For example, volunteering, participating in group activities, or supporting local businesses can enrich your life and provide a sense of belonging.

2. Frequency

Once you’ve established the value an item or service can create for you, consider the frequency you’d use it.

People discount frequency in both directions:

They overvalue products/services they barely use
They undervalue products/services they use daily

If the increase in value or reduction in defection is minimal, I might still warrant buying a product/service if I use it all the time.

The more frequently I use an item, the more I can justify spending money on it.

If you’re still unsure whether to splash the cash, try combining Value and Frequency to estimate step #3, ‘Cost Per Use’.

3. Cost Per Use

Take the value of the item and divide it by the number of times you expect to use it.

By considering the cost per use, you can make more informed decisions around spending and prioritise products/services that offer the most value and utility over time.

I love this approach as it encourages mindful spending and balanced resource allocation.

Here’s an example of how I’ve used it to justify spending 20x more on an item.

Glasses

I need glasses to read and drive. I don’t need them to see where I’m going, but I can’t see details without them. I wear them all day, every day.

Glasses have a big impact on how you look and feel.

I could easily spend £30 on a pair (and I have), and it would have the same utility as a £600 alternative.

But my face would look different and I’d feel different wearing them.

As I wear glasses all day, every day, I have zero guilt about spending whatever I like on a pair of glasses that enhances/compliments my face and makes me feel good wearing them.

I don’t care what others think about them, as long as I’m comfortable. (Not for status)

I can’t remember the exact amount I spent on my current glasses, but I believe it was around £600. For my first pair of glasses, I went with a pair that cost around £30.

The impact the glasses had on my reading and driving (utility) was close to zero, although my current pair have anti-glare and blue-light filters (health advantages).

But the way they made me look and feel was dramatically different.

I tried to avoid wearing glasses initially, and looking back at old photos, you’d see why.

When I ‘invested’ in a nicer-looking pair that complimented my face, I felt more confident and comfortable. They made me feel like I was ‘better looking’ – whether they actually did or not was irrelevant.

If I keep my £600 pair for 6 years and wear them every single day, that’s £0.27 a day for the privilege.

The £30 pair, during the same timeframe would cost £0.01 a day.

The key question I needed to ask myself was…

Am I willing to spend an extra £0.26 a day for the nice pair?

In this case, I was.

I’ve gone through the Cost Per Use process to justify spending money on an expensive mattress, gym equipment and now a laptop.

Do you REALLY need to spend £4,000 on a Laptop?

Absolutely not.

But when I calculated the cost per use, it made sense to me.

Like glasses, I use a laptop 6-9 hours a day, six times a week. Outside of my bed, office chair and glasses, my laptop frequency is right up there.

My last 3 laptops have been Windows. They’ve lasted 5 years, 6 years and 4 years, respectively, before having significant defects with them.

One of my friends, who lives on his laptop, has had his Macbook Pro for over 10 years. When you speak to Apple experts and other users, they suggest that Macbooks last longer than their Windows alternatives.

My most recent Windows laptop cost me £1,500 and lasted 4 years. With inflation, that might cost around £2,000 now.

So, I could spend around £2,000 for an equivalent replacement today, resulting in a total spend of £3,500 for around 8-10 years of use.

There’s no guarantee my Macbook will last 10 years, but let’s play assume that I have the same experience as my friend and many others. For longevity alone, the additional cost could warrant spending more on Apple.

Now, when I factor in things I value, like no Windows updates, enhanced user experience (from typing alone), no additional security subscriptions, Microsoft packages, etc., you could start to see the Macbook as a justifiable alternative.

You could agree or disagree with the Windows vs Apple paragraph above but it’s irrelevant*. It only matters what I think in this situation as I’m paying and I’m using it.

The same goes for you.

Consider the Value, Frequency and Cost Per Use to determine whether paying extra for the product/service is worth it for you.

There’s one final suggestion for those of you who are still undecided about splashing the cash that will ultimately allow you to spend money on ANYTHING guilt-free.

*Side Note 1: I made an agreement with myself upon buying the previous Windows computer that this was the last chance Windows had. I spent the most I could on the best Windows computer I could find and if it conked out in less than 6 years, I would experiment with Apple.

*Side Note 2: I paid for the laptop through my business, which is a company expense. I had the money to afford it and felt the Cost Per Use was worth it for now. Let’s see how it works out.

Guilty Your Honour

Guilt is a strong emotion.

We’ve all felt it at some stage in our life.

It’s not nice.

Why do we feel guilt?

Tony Robbins believes it’s the result of violating your standards.

You do something (either intentionally or unintentionally) that goes against your values or beliefs, which leads to a sense of inner conflict.

Have you experienced guilt when spending money?

It’s common among frugal folk, debt-free wannabe’s and people with financial goals because it feels like a ‘violation of standards’.

Therefore, the simple (not easy) approach to eliminate guilt is to:

Identify your spending standards
Keep to them

Most people fall at the first hurdle because they don’t know what their spending standards are. This part is easy…

Depending on your financial circumstances and goals, use the following to get you started.

Decide on a percentage of your take-home pay:
- 5% = You’re in debt, live paycheck to paycheck, and have little to no savings and investments.
- 10% = You’re debt-free, have a 6-month emergency fund, and have started investing.
- 20% = You’re financially free or well on your way, have a high disposable income (spare cash after bills), and you’re ready to enjoy life.

5-10% on guilt-free spending is a great place to start.

You can adjust the amount after a couple of months until you find the right balance.

Then you just need to keep to it.

Use this to help…

Guilt-Free Spending Account

Everyone should have a set allocation of their take-home pay that goes into a guilt-free spending account (GFSA).

It can be a fixed amount (eg. £100 or £500) or it can be a set percentage of a fluctuating income (eg. 5%-20%).

I like the percentage approach as it incentivises increasing disposable income (spare cash after bills).

You can spend this money on ANYTHING you like without justifying it to anyone.

It’s a fundamental part of my ‘5 Bucket Budgeting System‘, and it’s important for people on both ends of the extreme – Spenders and Savers.

SPENDERS – It caps a limit for those who love to spend. Once it’s gone, it’s gone. It prevents overspending by enforcing a set amount. Stick to spending the money within your GFSA, and you can shamelessly spend your cash AND meet your financial goals.
SAVERS – The GFSA is equally effective for frugal savers. My partner, Lou, falls into this category. They struggle to justify spending money on luxuries or “nice things” because they don’t deserve it. The GFSA sets a pre-agreed spending standard. So long as you keep within it, you have no reason to feel bad for buying anything.

Once you’ve decided on the amount you feel comfortable allocating to your GFSA, set up a brand new bank account. This can be with the same bank or a different one, it doesn’t matter.

It just needs to have a separate card.

Set up an automatic standing order to transfer the money into your GFSA as soon as you get paid.

Spend away when the money drops.

It’s really that simple!

Remember, the amount can be adjusted over time once you’ve given it a test drive for a couple of months.

If you don’t spend it all one month, it rolls into the next.

But once it’s gone, it’s gone.

You either need to earn more money in the meantime or wait until the next payday.

(See ‘TRY’ below for a full summary)

Reflect and share this with someone.

ASK

“Do you know what £ or % you’re comfortable spending guilt-free each month?”

“Do you spend money on Status, when you could spend more on Value?”

Write down what comes to mind.

TRY

This week:

1. FOCUS ON VALUE & FREQUENCY

There are multiple things to consider when making a big purchase.
Start by looking at Value and Frequency.

2. VALUE

Be open to buying products/services that make you:
- Money
- Memories
- Save time
- Healthier
- Stronger Relationships
Avoid Status purchases (wanting others to see/know/talk about it).

3. FREQUENCY

Don’t overvalue products/services you barely use and undervalue products/services you use every day.
The more frequently you use an item, the more you can justify spending money on it.

4. COST PER USE

Estimate the ‘Cost Per Use’ to make comparisons between products/services.

5. ELIMINATE GUILT

Guilt arises when you violate your standards. Eliminate guilt by:
1. Identifying your spending standards
2. Keep to them
5-10% of take-home pay on guilt-free spending is a great place to start.
Adjust accordingly over time.

6. GUILT-FREE SPENDING ACCOUNT

Everyone needs a GFSA. (Spenders and Savers)
Transfer your allocation to a separate bank account with a separate bank card as soon as you get paid.
Spend away totally guilt-free.
But once it’s gone… it’s gone.

HIT REPLY and let me know how you balance Spending and Saving or if you’ve taken something away from today’s Newsletter.

I read and reply to every email, and remember, I’m rooting for you!

Remember: Little by little, a little becomes a lot.

Reply to this email and share how it went for you. Let me know if you’d prefer to remain anonymous.