Debt reckoning: Guilt-free expenses that make you richer

When most people think of a plan for spending money, they think of the word “budget.”

But a budget is a plan for restricting your spending, and that doesn’t comport with a philosophy of living wealthy today. By spending your money in a mindful, deliberate way, you can live wealthy now and still contribute toward your prosperous future.

Think of this as building a “mindful” cash management plan. And, to create your own, you’ll need to think about expenses differently.

The first step is to stop thinking of “expense” as a negative word.

On the contrary, there are four types of expenses and only one of them is worth avoiding. Those four types are: destructive expenses, rainmaking (productive) expenses, protective expenses, and lifestyle expenses. So first, let’s look at the worst.

No upside

Among the various expenses you encounter, the only one that’s a serious problem is the destructive expense.

Overdraft fees; the use of credit to make regular purchases; expenditures on vices, products, or services you don’t use or that don’t add value are all are expenses that you should cut out of your life entirely.

For some people, however, getting rid of bad spending habits can be difficult. But the good news is, when you can replace one bad spending habit with three good ones, things get a lot easier.

This brings us to the subject of positive expenses.

Seeding for success

Productive or rainmaking expenses are how you make money. Spending more money to find the right employee, the best equipment, an effective marketing campaign, or a supportive mastermind group can pay for itself over and over again.

If spending $10 on a rainmaking expense makes you $20, then don’t stop spending until that well runs dry.

Other rainmaking expenses are those that keep you functioning at peak performance. For example: high-quality food and nutrition, a gym membership, and exercise equipment.

Education can be one of your most useful rainmaking expenses. But be careful: If you don’t use the education, then it was wasteful and destructive rather than productive.

Secure the future

Protective expenses are used to safeguard your family, your productivity, and your way of life.

A good example is putting money away into a separate account until you have at least six months’ worth of savings.

This category also includes things like life insurance, disability insurance, medical insurance—plus auto and home insurance, too.

Then there’s emergency preparedness, like having an extra food and water supply on hand, an electric generator, and fire extinguishers.

These are all expenses you shouldn’t skimp on.

For example: Many people purchase only the minimum amount of auto insurance legally mandated to make their policy as cheap as possible. But if they injure someone in a car accident, they may not have enough liability coverage in case of a lawsuit.

In that case, one expensive judgment against them could in an instant wipe out all their years of hard work earning, saving, and growing their wealth.

Incidentally, a less-obvious feature of protective expenses is that they help you be more productive. When your mind is free from the worry and stress that comes with uncertainty, you have more room for productive thoughts.

And over time, those extra productive thoughts can exponentially increase your cash flow and your wealth accordingly.

Standard of living

Lastly, lifestyle expenses are important and not something you should seek to avoid.

Vacations, fine dining, the latest smartphone or gadget, special experiences with your family—these have the power to rejuvenate your spirit and help you to enjoy life along the way. They’re also the reason you work so hard in the first place.

The only caveat is that a lifestyle expense must be managed well, which means it’s best to pay in cash and do all you can to avoid using credit.

A good plan is to create a savings account, separate from your other money, that is only for funding your lifestyle expenses. That way you can enjoy guilt-free lifestyle spending.

Mindful cash management

They say it’s easier to change your diet and lose weight when you concentrate on the foods you can eat, rather than the foods you can’t.

Likewise, if you focus on the three out of four types of expenses that add to your productivity and peace of mind, it’s easier to cut out destructive expenses. As you become more keenly aware of how you approach expenses and alter your behavior in turn, the end result will be your own mindful cash management plan.

Garret B. Gunderson, a lifelong entrepreneur, is a financial advocate to chiropractors promoting a vitalistic financial philosophy to assist DCs in creating sustainable wealth. His company, Wealth Factory, helps entrepreneurs navigate personal finances and investing. He wrote the New York Times bestselling book Killing Sacred Cows. Get a signed hardcover copy at freebookforchiros.com.