Pick 3
Published by 14 Comments

Use the “Pick 3” Rule for Better Spending Habits

January 12, 2016

When it comes to getting a handle on your finances, the biggest challenge is getting started with a plan of action.

Where many people fail is by misunderstanding the core of their spending habits, thinking that any heavy spending is bad spending. While this might be true later down the road in your financial journey, this can often lead to early burnout in developing new money habits. Instead, your first steps in a long term financial plan should be to determine the expenses that bring the most satisfaction, while also determining the biggest spending pain points. The easiest path towards doing this is to simply pick 3 of each.

Pick 3 Spending Pleasures

Before you start shaming yourself about your poor money habits (they could be worse!), you should take a closer look at 3 spending habits that bring you the most happiness. What many personal finance folks don’t often tell you is that it’s actually okay to spend money on things you enjoy.

Here are my 3 spending pleasures:

  1. Outdoor gear (camping, hiking, running)
  2. Movies
  3. Music (Spotify subscription, guitars, great headphones)

Here are Ashlee’s 3 spending pleasures:

  1. Art supplies (for hand-lettering, calligraphy, etc.)
  2. Movies
  3. Books

Taking movies as an example, the feeling of walking into a dark theater, smelling the fresh popcorn, and being entertained for those two hours is something that we’ve always deeply enjoyed. If we would’ve made the decision to cut out movie-going in our early budgeting years, we would’ve been toast. While we can make those sorts of changes now that we’ve set a course for our financial future, we simply didn’t have that mindset during our time as Financial Bozos.

When you’re new to financial changes, you need those small rewards to remind yourself that getting a solid grip on your finances doesn’t have to be a miserable experience. Once you define those 3 expenses that bring you happiness, you could actually start building your budget around these items – cutting back on what matters less in order to fund the spending pleasures.

It’s crucial, however, that you closely examine what you may consider to be a “spending pleasure”. If you’re not careful, those expenses could actually be damaging your finances. A shopping addiction, for example, may only be providing you with short bursts of happiness. When the source of that happiness is coming from the spending itself, rather than the experience that comes from the spending, it’s likely to be a spending problem.

Pick 3 Spending Problems

Now that you’ve picked 3 expenses that you enjoy, it’s time to take a hard look at 3 spending habits that are dragging your finances in the dirt. This might look like overspending on eating out, entertainment, or worse, fancy cars and houses.

My 3 spending problems are:

  1. Dining out
  2. Candy of all sorts (but especially Sour Patch Kids)
  3. Video games

Ashlee’s 3 spending problems are:

  1. Dining out
  2. Candy of chocolate sorts (especially M&M’s)
  3. Impulse purchases at the checkout aisle

It’s important to define these spending problems early, as they’ll be your primary focus for the early months of your financial plan. While you may have more than 3 spending problems, it’s helpful to narrow this down to a 3-item list at first. It’s from these items that you should begin to steadily spend less over time, in order that you can start to shift that money towards the 3 expenses that provide you with the most fulfillment.

What’s most interesting about the spending problem list is that you likely won’t miss these items once you’ve removed them from your spending habits. Impulsive purchases are never worthwhile, and for me, video games typically get purchased only to sit in my game library unplayed.

The core idea behind these “pick 3” lists is to provide razor focus when making long term changes to your money habits. It’s never easy developing a budget, becoming a saver, or making sense of investing. But by starting small and identifying these two small lists of expenses, you’ll learn enough about yourself to make changes that truly last.

Share on FacebookTweet about this on TwitterShare on Google+Pin on PinterestShare on LinkedInShare on TumblrShare on StumbleUponShare on RedditEmail this to someone
Share this post
  • https://cdnmoneymatters.wordpress.com/ Jen Collins

    My 3 pleasure are:

    – yoga (at a nice place)
    – eating out with friends for pleasure
    – travel

    3 spending problems:
    – clothes!
    – fitness gear I don’t need (because pretty)
    – eating out when I’ve been lazy and didn’t make food

    I have a self-care category in YNAB which covers yoga, massage, donations, and books which is adequately funded, with clothes, fitness gear, movies and music (which I like but don’t LOVE), and eating out when I’ve been lazy relegated to a teeny tiny category. It’s a constant reminder to keep my priorities in check.

    • http://savemoneydammit.com Save Money, Dammit!

      We really like that idea of the self care category. Also, it’s cool that you clearly define whether it’s eating out with friends vs eating out based on convenience. We definitely eat out based on convenience way too often, but we don’t think people should avoid eating out when there’s the potential to enjoy those times with friends. That’s a great way to look at it!

      Those are really great lists! As always, thanks for stopping by and it’s great to hear from you, Jen!

  • http://www.TipYourself.com Mike @ Tip Yourself

    This is a great way to organize around being more mindful of our spending!

    My 3 Pleasures are
    1. Dinning Out
    2. Books
    3. Wine

    My 3 Spending Problems
    1. Take out
    2. Impulse Purchases
    3. Coffee

    • http://savemoneydammit.com Save Money, Dammit!

      Hey Mike, thanks for reading and commenting!

      I recently (as a New Year’s resolution) gave up one of my long-time problems: Diet Coke. It’s literally saved me over $100 this month alone (and the month still has a couple more weeks). Identifying spending leaks and really determining what gives us pleasure makes spending a little bit of dough feel less like a waste and adds value to my life!

      • http://www.TipYourself.com Mike @ Tip Yourself

        It’s amazing how quickly those seemly small decisions add up! One of the ways many early members of Tip Yourself have used the app is to track small savings from daily decisions. They like seeing the savings grow in their Tip Jar where instead it would often get lost (and spent) in their checking account. Cheers!

  • alwaysconservative

    My husband and I had three goals when we were still working. 1. Retire at age 55. 2. Pay for our son’s college education with no student loans. and 3. Pay off the mortgage so we could retire at age 55. Not quite what you were discussing about three spending priorities, but still fits in with the “3” theme.

    • http://savemoneydammit.com Save Money, Dammit!

      Those are amazing goals!

      While we’re making financial independence a priority, that mainly means we’re saving a lot. Sometimes, with hardcore saving comes guilt whenever we spend money. We decided to identify what our spending problems are (eating out too much, impulse purchases, etc.) that aren’t really worthwhile in the long term game plan, and determine what we actually enjoy buying (books, music, etc), so we can still live a little without feeling guilty while still saving for our goals!

  • Arrgo

    Good points. You can still have and do almost everything you want, you just have to develope some discipline. You can go out to eat, but how often do you really need to do that? Every Friday? No… Get some self control and cut out the wasteful spending and how often you go and you can still enjoy whats important. I enjoy music and quality audio so I can relate to having good headphones. I recently treated myself to a flagship set of Sony MDR- Z7’s which are great. I got them from Amazon warehouse deals “like new” for about $450 as opposed to $700 retail. Some won’t understand but they are worth it to me as audio is my thing. They’ll easily last for 10+ years.

    • http://savemoneydammit.com Save Money, Dammit!

      Thanks, Arrgo! Love that you treated yo’ self to those awesome headphones. Eating out is definitely an issue for us (mainly out of laziness and poor planning), but we’ve been able to reign in that spending because we were able to admit it was a problem and wasteful.

      Discipline is the name of the game with most aspects of personal finance, and it’s so true that you won’t miss buying all the stuff once you really identify which purchases are worthwhile and are a conduit for happiness!

      Thanks for reading and commenting, Arrgo!

  • http://mymoneycounselor.com/ Kurt

    I like your simple approach. I think it’s the tedium of many more complicated financial planning concepts that keeps people from even starting a plan or burns them out quickly on sticking with a plan. Simple is good! especially as a starting point. Thanks!

    • http://savemoneydammit.com Save Money, Dammit!

      And simple approaches aren’t intimidating like so many other alternatives. Too often, people get scared away with overzealous use of jargon or complicated procedures!

      Thanks for reading and taking the time to comment, Kurt!

  • http://negativetopositivenetworth.com/ Negative To Positive Net Worth

    What my wife and I decided to do once we became consumer debt free was set aside a certain amount each month for our pleasures. When the money’s gone it’s gone until next month. Now we can enjoy our pleasures (whatever they may be that month) without worrying if we went over budget. It works for us. Overall I found the article to be helpful in getting folks to think about their problem pleasures.

  • http://moneygrower.co.uk moneygroweruk

    Never really heard of this ‘savings technique’ before but it does sound great. The conventional savings advice tends to be full throttle and makes you kick out spending on things you enjoy. With this pick 3 rule, by allowing yourself to spend money on three things you enjoy, it keeps you motivated in the long-run.

    • http://savemoneydammit.com Save Money, Dammit!

      It’s helped us stick to our budget and savings goals (and even save more)! Sure, we’re preparing for our future, but we want to enjoy life along the way a little bit, too.