Types of Spending
By Kevin Estes
Someone recently said:
I’ve decided spending is basically a hobby. It’s not about fulfilling needs really. It’s a way to occupy our time.
However, expenses are more nuanced.
What Current Spending Isn’t
Current spending is not:
debt repayment (past spending) or
investment (future spending)
Four Categories of Spending
The major spending categories are:
Needs
Entertainment
Societal
Addiction
1. Needs
A base level of spending is needed to meet most basic needs like food, clothing, and shelter.
Some people devoted to a religion full-time might get by without money. The rest of us generally cannot.
Spending on basic needs has a high physical benefit and a low psychological benefit.
2. Entertainment
The extreme opposite from basic needs is pure entertainment.
It’s spending for enjoyment, which includes things like hobbies, shows, and events.
Spending on pure entertainment has a high psychological benefit and a low physical benefit.
3. Societal
Next come expenses due to societal expectations. That’s the spending driven by what those around us expect or require.
We all need shelter but not necessarily a five bed, three bath house with a three car garage.
Taxes fall in this category as well.
At their best, societal expenses provide both physical and psychological benefits.
4. Addiction
The last major spending category is insidious.
Addictions can be physical like drugs and alcohol or psychological like gambling and extreme retail therapy.
They often cause long-term physical and psychological harm. All told, addiction is terribly expensive.
Multiple Categories
Many expenses includes elements of different spending types.
A nice dinner out offers nourishment, entertainment, and social connection.
In addition to providing physical shelter, a home supports entertainment and gatherings.
Food, drink, and dance at a concert provide physical benefits in addition to the live music.
If you’d like to discuss your planned expenses, feel free to…
Disclaimer
In addition to the usual disclaimers, neither this post nor this image includes any financial, tax, or legal advice.
