Americans are spending more, saving less, and racking up incredible amounts of debt. Learn how this rarely mentioned but simple money skill can help.

The Most Important Money Skill Nobody Mentions

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“Daddy, can I bring a dollar to the store so I can play the claw game?”

I get asked this same question every time we go out. Seriously, like every… single… time. And since we go to the store about 1.7 million times a week, I can finish her sentence the instant I hear the tone in my daughter’s voice.

“No. Not this time.”

“But Daddy, please?”

“No.”

Honestly, I feel like a broken record. But hey, at least she’s asking to use her own money, right?

Most of the time, I explain how she’d be broke if I let her bring money every time we go. I also remind her to focus on the goals she’s saving for – which usually includes a special toy, a piece of clothing, or maybe a new game for her Kindle Fire. A few weeks ago, she really impressed me, though. She made a lemonade stand and donated her profits to the animal shelter. It’s things like this that make me feel like we’re doing something right!

Occasionally, the young one will catch me in the right mood. I’ll allow her to bring a little money, and she’ll get super excited. It’s a special event as evidenced by the miniature purse she uses to carry her money. The little stinker is actually really good at the darn game too, a skill she apparently inherited from her mom. More times than not, she’ll come home with a new stuffed animal. And since we need more toys like we need a hole in the head, she’s been giving her “winnings” to the family dog – which also saves me a few bucks at the pet store!

In my opinion, this is how it should be. Spending is a big event for her. I’m thrilled that my 8-year-old is starting to think through all of her purchases. For instance, instead of buying several small toys with her Christmas money, she decided to use those funds for something she wanted more instead – a new “Baby Alive” doll. While I don’t find the doll’s “bodily functions” as heartwarming as she does, I’m happy to see that she’s learning how to make trade-offs.

Unfortunately, that’s where I worry about the rest of us.

The Money Skill Nobody Talks About

“Wealth consists not in having great possessions, but in having few wants.”

I read this quote a few days ago, and I couldn’t get it out of my head. It’s clear that Epictetus means a person who wants little is wealthy in spirit. But for me, there’s more to it than that. I truly believe that wanting less can also translate into actual wealth. By saving on the things we don’t really want, we have more money to reach the goals that are actually important to us.

Making trade-offs is the most important money skill that nobody every mentions. Unfortunately, most of us either don’t know or have forgotten how to do this. Heck, we barely understand what it even means, and it’s killing us financially.

The Ugly Truth About Not Making Trade-Offs

Americans are terrible at making financial trade-offs, and the ugly truth is in the numbers everywhere. 71% of Americans aren’t saving enough for retirement. The average American household with debt owes $16,748 on credit cards, $28,948 on cars, and $49,905 in student loans. Most Americans don’t have $500 in savings to cover an emergency.

And these aren’t just numbers. They are a reflection of people’s real lives, a sad reminder that most people are spending more than they earn and putting themselves in severe financial jeopardy.

Americans are spending more, saving less, and racking up incredible amounts of debt. Learn how this rarely mentioned but simple money skill can help.Look no further than some of the comments Holly receives on her Indy Star pieces. While there is a fair amount of financial illiteracy, what’s really disturbing are the comments by people who simply don’t care. Whether she’s writing about car payments, travel sports, or used clothing, people seem to do and say anything to justify their spending. They’d rather shout ridiculous insults or lie to themselves than look at the hard truth – the financial decisions they are making have real-life consequences. It’s one part sad and two parts scary.

In our never-ending race to get more stuff, we’ve forgotten what it is we actually need. We’ve don’t know how to save, much less why we should be doing it. Retirement is a goal that’s too distant to inspire most of us to action, so we spend all that we have now at the expense of our future. We rack up monthly bills, put it all on easy credit, and keep on spending. In a best case scenario, we steal from our future selves and limit our quality of life during retirement. At worst, we simply kick the can down the road and leave our children with the bill. We convince ourselves that “It will all work out later.”

No. No, it won’t… not unless we do something about it now.

Learning to Prioritize

Here’s the thing, it doesn’t have to be this way. You can do this!!! And it’s really not that tough to master. It doesn’t even have to be all or nothing. Just a few simple changes can help you get everything you really want and more!

Do you want a better quality of life? How would you like to retire before you’re 65, 70, or older? Want to travel more, help your child pay for college, or simply stop living paycheck to paycheck? You can. Here’s are a few quick tips to get started.

Start a Budget – Budgets get a terrible rap. Most people believe budgets restrict what you’re able to spend. They’re wrong. Budgets are spending plans which help prioritize what’s most important. By allocating your money to meet specific monthly goals, you’ll quickly see how much you have to save and spend each month. Prioritize what you need, then decide what to do with the rest. Budgeting helped us get our money straight and it can do the same for you. Learn more about the style of budgeting we love here.

Track Your Spending – It’s hard to make a change when you don’t know where your money is going. Tracking your spending helps you analyze your spending and will also help you stay on budget. Seeing exactly how much you’re spending can be a great catalyst for changing your habits. Learn more about tracking your spending here.

Start Investing – If your employer offers a retirement option, make sure you take advantage of it. Put at least enough in retirement to cover any sort of match (That’s free money they’re giving you!!!), but don’t stop there. Most people should be saving at least 10% of their income for retirement. If you’re not and need an easy DIY solution, check out one of these automated solutions.

Wrapping Up

At this point, I’m glad to see that my daughter is already learning to make trade-offs. I’m positive this money skill will suit her well once she reaches adulthood. She’ll already know what it means to prioritize, putting her far ahead of the curve.

I truly believe that making trade-offs is essential to getting ahead with money. A budget is a great tool to help you do this. By spending with purpose, you’ll prioritize what is important, giving you plenty of options for the rest. Because when you save on the things that don’t matter, you have more to spend on the things that do.

Good luck and keep on saving!

What do you think? Tell us about any trade-offs you’ve made in the comments below!

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10 Comments

  1. It’s really hard to control your wants as an adult when there’s no one there to control your spending but you. 😉

  2. It’s funny how so many people are talking about getting finances in order and living with less, and there are STILL people who just don’t get it. I’m sorry, but I’d rather live with less now and have a great retirement than have a bunch of stuff I don’t need and have to work the rest of my life.

  3. Learning how to make trade-offs is vital. Knowing that I am only actually working two days this week, I pushed myself to get significant overtime on Sunday. It was difficult, but I know that one long Sunday would translate into a week of ease while still being able to pay bills, pay debt, and invest.

  4. Unfortunately, knowing the difference between wants and needs isn’t enough. We have to actually spend on the needs first, even though we don’t always enjoy doing so. A big trade-off in my house is healthcare. We’d rather be going on vacation than spending almost a third of our budget on insurance, doctors, and medicine. But we do what we need to do and luckily I have relatively few wants.

  5. Making trade-offs is the key to budgeting effectively. The whole point is to evaluate your spending to find out what is most important to you and cut the rest.

    Personally I’m a fan of reverse budgeting. First I save. Then I cover fixed expenses. Then the rest is spending money. This creates some artificial pressure and forces me to make trade-offs in my spending.

  6. I love that quote! It really does make building wealth access to otherwise “average” people. We have traded driving used cars without a car payment with having new ones, and that means being able to travel more and save for early retirement. Doesn’t even feel like a sacrifice because we never had new cars and got used to that, so it’s not on our “wants” list.

    I do struggle with how much to let the kids do what they want with their money (so they can learn from experience) and how much direction to offer since I suspect they don’t get it entirely. I’ve been trying to dissuade them from blowing all their money all the time, but ultimately leave the choice up to them. But sometimes I wonder if they’d get it sooner if I didn’t chime in. Probably depends on age and personality, too. Any thoughts?

  7. I wish I had someone telling me no! My biggest issue is amazon online shopping ha ha. I’m putting myself on a self imposed ban!

  8. Trade offs are one of the most important things as literally we trade off every day. Whether it be a bottle of water or a fattening lattee the latter making you fatter and your wallet thinner. Love the way people miss this each day but its so important in all our lives.

  9. Learning to prioritize is definitely a skill many people don’t have. I’ve heard a story once were someone couldn’t pay their electric bill because they had just paid their expensive cable bill – and therefore had their electricity shut off and couldn’t enjoy either!

    1. *smh* Yep, it’s one of the most important money skills that anybody can have. Unfortunately, it seems to be in short supply.

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