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]
More about...Budgeting

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lmoot
lmoot

I know it’s not really the topic at hand, but it’s interesting to me how others classify joy/entertainment, and really makes me think about how I classify it myself. Not to pick on Zack, bc I actually really like his strategy, but the view on the “evil” needs seems a little pessimistic, especially since most of those needs fulfill that famous hierarchy that allows one to care about the “wants”. I’m sure some of those needs many people derive some pleasure from, like Internet and phone (and after a fixed cost, the use is “free”). I use my phone and… Read more »

Zach @ Four Pillar Freedom
Zach @ Four Pillar Freedom

Thanks so much for the shout out, J.D.! Always a pleasure to be featured on a site of this caliber.

I didn’t even think about the purple being in between the blue and red…I’ll keep that in mind for future visualizations hahaha

Leah
Leah

I get where he’s coming from, but like lmoot above I think he could frame it a little differently. I find my rent money, for instance, very satisfying. I could save a lot of money by having roommates. I choose to rent a small one-bedroom apartment by myself instead. It is deeply calming and satisfying to have my own little place of respite and solitude. It’s sunny and quiet. Oh, and my rent is well below market rate (patience + craigslist)! It sounds like maybe he could think about how to make those obligatory expenses more joyful, since he has… Read more »

Lady Dividend
Lady Dividend

I quite enjoy Zach’s visualizations, as they are an easy way to grasp financial ideas. Now I have to go through my spending and figure out how I can do more of the “purple” and less of the “red” everyday!

Dan Erickson
Dan Erickson

I like the visual. I also love the simplicity and white space on Zach’s blog.

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