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The 1-2-3 Money Plan: The Three Most Important Steps to Saving and Spending

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Gregory Karp explains when to spend your money, why to pay attention to spending, and what to spend your money on.

What Is Spending Smart?

Before we proceed, I should define one phrase, so we are on the same page—both figuratively and literally, as it turns out. The phrase is spending smart.

Spending smart is a specific philosophy for achieving financial security without depriving yourself. It is not a cheapskate plan. It’s about spending your money smarter on things you’re buying every day anyway. It abides by the notion that you can’t outearn dumb spending. Just ask all the millionaire celebrities, professional athletes, and lottery winners who end up broke.

Let me repeat for emphasis: You can’t outearn dumb spending.

Spending smart aims to plug the leaks of wasteful spending and redirect money to things you truly care about.

Spending smart can pervade every aspect of your money life. It is so powerful that it can mean the difference between struggling and living rich.

Spending smart is important now more than ever. With the meltdown of banking and financial systems in the fall of 2008, credit became more difficult to get, the stock and bond markets tanked, and consumers clamped down on spending. All of a sudden, frugality was not only hip and cool, but necessary.

And we have more marketing coming at us than ever before—on the television, newspapers, magazines, radio, Internet, and billboards, to name a few. This bombardment of messages enticing us to buy stuff means we have to say no. If we didn’t say no, we’d go broke in no time flat. We have to say no literally dozens of times a day. We have to say no so often that we can become weak, weary, and vulnerable as consumers.

We also have available credit like never before. There was a time when no money meant no buying. Not today. These days, you can charge it today and pay for it whenever. Saying no becomes that much harder when we have enough credit to buy.

Spending smart is about making good decisions when saying yes. It’s not always about spending less, but squeezing more value from the money you’re already spending. It’s not about deprivation. It’s about liberation.

So, before we dive into very specific advice in the next chapter, let’s briefly look at what this notion of spending is all about.

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