Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
The concept of giving first, saving next, and spending last has been touted by many financial publications, and is a concept that I personally live by. In fact, it’s the best money advice I’ve ever received. It provides me a sense of priority and balance between generosity to others, achieving my own financial goals, and enjoying life.
Here’s how I make it work.
Being generous to others
Generosity means different things to different people. Some people focus on giving to charity on a regular schedule, whereas others might just give every once in a while. Some people give to their church or a charity/organization with a purpose close to their heart, and others choose to support a family member. Some people give large amounts, whereas others give whatever they can.
With all this being said, there is no right or wrong way to give to others, as long as it is done with a pure heart.
I am a believer that the world would be a much better place if we all took some time to intentionally think about and do more for others. Making a commitment to giving first helps my family and me keep perspective on life and realize that there are so many people who can use some type of help.
Even further, I believe that when you help others, it leads to good things coming back in return. A Bible scripture states, “A generous person will prosper; whoever refreshes others will be refreshed.”
Saving to achieve financial goals
I am a big proponent of systematic savings plans and wealth-building, but most importantly, I know my reasons for accumulating wealth. This awareness helps me stay committed to my financial planning goals.
The first goal is to create generational wealth for my family. The meaning of generational wealth varies from person to person. It can range from leaving millions of dollars to your heirs to making an effort to leave a family house (which can create a mortgage-free financial situation for heirs).
Also, there are opportunities while living to create financial impact for loved ones. As an African American who would like to see more families of color establish generational wealth, this goal is something that is a particular passion of mine. Examples can include the following hypothetical scenarios:
- Grandparents helping with college tuition, which would help their grandson or granddaughter not rely on student loan debt
- Parents paying the full amount for a wedding day, which could free up available cash for their son or daughter to put a larger down payment on a home
- A parent establishes a very successful business and trains their son or daughter to eventually run the firm as part of a succession plan
- A parent creates a sizable amount of rental income via being a landlord of several properties, but decides to stop this work in retirement. The son or daughter takes ownership of the properties, which not only have high equity value, but also reliable streams of income
- A grandparent who died recently leaves a substantial inheritance. The grandson or granddaughter now has seed money to start their own business with a high probability of succeeding because of the financial support received
Another savings goal of mine is to retire comfortably, which I define as having an appropriate amount of money to do the things I truly enjoy and not worry about expenses (e.g. potential healthcare costs). Each individual’s definition of retirement success is different. “Retiring comfortably” is just how I describe it. My ultimate goal in retirement is really just to have peace of mind when it comes to money.
Spending and enjoying life
Even with the first two points that I noted in this article, there comes a point when we all still have to spend some money and enjoy life. Tomorrow is not promised to anyone, so it is important for all of us to live life to the fullest each and every day.
Despite it being the last action in the giving, saving, spending sequence, I still make sure to spend money on quality items when appropriate. Let’s face it: Items and experiences cost money (sometimes a lot of money) in this world, so there is definitely a time when we eventually have to spend. I just make a point to always be responsible about it by spending on things that really matter to me personally (such as family activities and vacations, healthy foods, and fitness).
Martin A. Scott, CFP, is the founder and financial planner of Lasting Wealth Principles, a fee-only comprehensive financial planning firm.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.