In one of the first women’s financial literacy classes I taught 25 years ago, I was surprised to see a woman I’ll call Jean on the registration list. I knew her to be a popular and – judging from outward appearances – financially very successful stock broker.

She attended all the classes, contributed her fiscal wisdom, and did all the assignments. But I was curious, and so after class one evening, I took her aside.

“Jean,” I said, “forgive me for asking, but I know that you handle other people’s money all day long. Why are you taking this introductory class?”

Jean looked down, embarrassed. “Gail,” she said softly, “I make a lot of money, it’s true. But I just can’t stop buying shoes.”

Jean’s comment helped me understand that many of us – men as well as women – may be spending to fulfill emotional as well as actual physical or practical needs.

Some of us spend on a whim. If income permits, and the purchase does not rock your financial boat – your impulse spending may not have an impact on your financial well-being.

But many of us have disorganized – even chaotic – financial lives, and find ourselves surprised or even dismayed when the bills come due. Your spending may not be serving your most important goals. Bringing order to your spending will help you manage all aspects of your financial life.

How can you organize your spending?

You can start by answering some very basic but critical questions: 

• What is important to you?
• What do you value?
• What do you need? 
• What do you want, both now and in the future? 

For most people, the most important and valuable things in life – whether those are family, good health, friends, belonging to a community, love, respect, a rich intellect, creativity, religion, or the arts, among many others – are the very things that money cannot buy.

Needs are basic: food, clothing, shelter, transportation, health care. But everyone’s perceived needs are different. “Needs” easily can cross a line into “wants,” which also are important and must be taken into consideration as you plan.

For example, one person’s wish to donate generously to charity may be another’s need. The need for food could be the ability to purchase basic groceries; while a non-cook may define it as dining out several times a week. “Transportation” could mean a bus pass, a used SUV, or a Town Car and driver.

Your needs and your wants translate into your goals. Each goal has a price tag, not just in dollars but also in terms of time. Other resources, such as the participation of others or your own labor, also may be required. You will have short-term spending goals, like buying a new coat for winter. You will have middle-term goals, such as paying off overdue bills or your credit card debt, or buying a car. And you will have long-term goals, like saving to pay for college, or for your retirement. Balancing short- and longer-term goals is an integral part of organizing your spending. And only you can decide whether to make the investment needed to obtain them.

If you enjoy shopping as recreation, you already know all the usual tips to avoid overspending: use cash only, put your credit cards in the freezer, make a list before you go shopping, let someone else shop for you. But also take some time to consider: why are you spending? Is it to replace a broken or worn item, or to re-stock perishables, such as food or toothpaste? Or are you spending to fill an emotional need? Are you bored, blue, anxious, lonely, or angry at your partner? None of these is a “wrong” reason to spend – the choice is always yours – but it helps tremendously to be aware of your motivation.

By taking these basic organizing steps, Jean, for example, can determine which goal (if any) can be achieved by investing the money and time to acquire one more pair of shoes. Her job may require that she keep up with the latest fashion, or her shoe collection may fill an emotional need. The choice to buy is hers. She must balance her spending with her longer-term goal, such as putting her child through college. Each time she shops for shoes, Jean can consider the tradeoff: not just the money she will be expending, but also the time she otherwise could be devoting to another activity, or to friends or family, working, or doing volunteer work. If she mindfully considers her prospective purchase through this lens – the actual cost as well as the “opportunity cost” – her desire for another pair of shoes might diminish. (Or not.)

Organizing your spending is one part of your financial plan, the others being earning, saving, and investing. And the basis of any financial plan is first determining your goals (wants and needs), and then putting aprice tag on achieving them.

Your goals will change as your needs and wants change – perhaps with a new job, debt payoff, or major life transition. That means your financial plan will have to change as well.  You can and should adjust it periodically, to reflect your new goals, and your plan to achieve them.

The next three-session class of “Creating Money Order” for women will begin soon. For more information, please contact me: gail@gailshapiro.com.