You know what?
All expenses are not created equal.
It’s true. Some expenses are better than others.
I like to bucket them into four categories. They are:
- Destructive (beer)
- Consumptive expenses (travel, food)
- Protective expenses (insurance, emergency fund)
- Productive expenses (investments)
Destructive expenses are those that are…destructive. They don’t add anything to your life and don’t really progress you at all. Destructive expenses are alcohol, gambling and similar costs that do not get you closer to the life you want to lead. The goal here is to minimize or eliminate these completely
Consumptive expenses are those related to your consumption. We have to have some consumptive expenses but they must be managed actively.
Protective expenses. These are items that help protect our quality of life and of those we love. Items such as insurance and contributions to our emergency fund fall in this bucket.
Productive expenses are expenses whose purpose is to progress us towards our desirable future. These expenses are investments, education and other items that add to our productivity and overall happiness.
It can be helpful to take a moment before you make a purchase to evaluate the type of expense it is.