Another way to visualize your finances: Color-coded expenses

This morning, I talked briefly about visualizing your financial progress when digging out of debt and when building wealth. Zach from Four Pillar Freedom has an interesting way of doing this.

He divides his expenses into three categories, which he has assigned arbitrary colors:

  • Purple things are free (or cheap) and they bring him joy. His goal is to spend as much time as possible in life doing the purple things. Examples: being in nature, spending time with friends, reading, writing.
  • Blue things cost money but they too bring him joy. He gives himself permission to spend money on the blue things from time to time without guilt. Examples: travel, coffee, dining out.
  • Red things cost money and don’t really increase his fulfillment. Zach’s goal is to spend as little as possible on the red things (without depriving himself or causing hardship). Examples: rent, groceries, utilities.

Here’s how Zach pictures his spending categories on a scatter plot:

Joy vs Cost

He writes:

I’d like to spend most of my day on the purple things. These things give life meaning at the beautiful cost of zero dollars. The blue things are like little treats. They’re great to enjoy every now and then. The red things are just necessary evils. They cost money and bring little joy.

While there’s an anal-retentive side of me that wishes Zach had chosen a different color combination (purple should be between blue and red!), I like this way of visualizing expenses.

It might be even more useful to classify them as “green, yellow, and red”, the colors of a traffic light. The free and cheap things that spark joy could be colored green for “go”. The costly things that provide fulfillment could be colored yellow for “proceed with caution”. And those expenses that don’t bring direct enjoyment could be colored red for “stop”.

[Four Pillar Freedom: The purple-blue-red philosophy of spending money]

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