Ramit's Money Dials

Ramit Sethi is a personal finance and behavioral science blogger who wrote I Will Teach You To Be Rich and had several courses on finance and behavioral psychology. He wrote about Money Dials in his blog recently. Each person has at least one thing they are passionate about, and that he suggests we focus our discretionary funds into that category, and spend less on things they don't care about.

For me, two categories are eating out and travel. I use those categories several ways, though. Eating out with friends allows me to try new foods (I love trying cuisines I've not eaten before!) as well as socializing with others. It also gives me more information about cooking - something I enjoy, but not enough to make it a category that I want to spend a lot of money on. The other category is travel. Similar to the novelty of eating different foods, I love traveling to new places and often go with friends. More new things and socialization.

When I realized that I was spending sometimes up to $200 a month on lunches and $250 on dinner, I felt like that was just ridiculously too much money to spend on something that I could make myself. I then cut down on eating out. I'd either bring lunch from home, or eat the cheapest entree on the menu.

Result? I was miserable. I realized that for me, eating out was of value, and that I should allow myself to spend what I can/want - assuming I'm not doing anything detrimental to any other more important goals.

And, to Ramit's instruction: double or triple the amount you budget! You should feel ok spending on the thing you truly value! See where you end up.

Turns out, for most months, I spend 1.1x more, or less than I originally expected, and worrying about that amount was completely unnecessary. It was a good experiment to got through, understanding that I needed to know what my barriers are, not just monetarily, but psychologically as eating out is also my socialization time as well.

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