A few weeks ago, there was a pretty great story going around various business and finance websites about Warren Buffett. According to the story:

One day Buffett went up to his pilot named Steve and jokingly said to him that “the fact that you’re still working for me tells me I’m not doing my job.”

“You should be out going after more of your goals and dreams,” Buffett reportedly said.

To help him with that, Buffett asked Steve to list the 25 most important things he wanted to do in his life.

Then Buffett asked that he review each goal and choose the five most crucial ones.

After considering a moment, he drew circles around five fantastic goals, confirming with Buffett that yes, indeed, they were his highest priorities.

And the rest?

“What about these other 20 things on your list that you didn’t circle?” Buffett asked. “What is your plan for completing those?”

Steve knew just what to say.

“Well, the top five are my primary focus, but the other 20 come in at a close second,” the pilot said. “They are still important, so I’ll work on those intermittently as I see fit as I’m getting through my top five. They are not as urgent, but I still plan to give them dedicated effort.”

Buffett suddenly turned serious.

“You’ve got it wrong, Steve,” he said. “Everything you didn’t circle just became your ‘avoid at all cost list.’ No matter what, these things get no attention from you until you’ve succeeded with your top five.”

This story spoke to me on a very deep level.

There are a lot of things in my life that I want to be spending my time and energy on. I’d like to be a good husband. I’d like to be a good father. I’d like to be a good friend. I want to write great articles that have an impact on people. I want to record a podcast. I want to make a Youtube video channel. I want to write a novel. I want to write some nonfiction books, too. I want to go back to school and study a subject I’ve long been passionate about. I want to devote time and energy to each and every one of my hobbies – board and card games, reading, geocaching, camping, rock collecting, and so on.

Here’s the thing: if I split up my time and energy among all of those things, I won’t be great at any of them. To be great, I need to narrow down that field as much as possible, cutting off my time and energy spent on those that don’t make the cut.

Right now, I’m spending some serious time thinking about how I cut that list down to five or six things that I really focus on. What things can stay? What things are most important – the things I really want to excel at and focus on? Which ones are not?

The same idea applies to money.

Once our basic needs are met – and that’s actually a really low threshold – we’re left with an unending list of wants. Do we want a bigger place to live? Do we want better food? Do we want better entertainment? Do we want better clothing?

We constantly make decisions like these in virtually every aspect of our life.

Here’s the catch, though. It is really hard to lower ourselves from an elevated level of spending once we grow used to it.

Here’s an example of what I mean. Let’s say that for a while you became very focused on the food you eat. You started being incredibly selective at the store, picking out only the highest quality items. Organic free range eggs? Organic free range beef? Ten year old aged cheddar made from only organic milks? They all go in the cart.

Before long, you’re used to eating high quality foods like this. The other cheeses don’t taste as sharp. The other eggs don’t taste as rich.

After a while, though, you begin to care less about food. Instead of flipping through that new issue of Saveur like a fiend, the issues start gathering dust. You stop visiting those foodie websites and start focusing on other things.

Yet, when you’re at the store, those expensive foods keep going into your cart. Just because your focus is elsewhere doesn’t mean that your spending on that less-focused area goes down. It just means that you’re juggling one more expensive ball in your everyday life.

It means that the list of “important things in your life” just gets longer and longer and longer, and that list of “important things” are each things that you dump money into without really thinking about whether they fulfill something truly important in your life.

One of the most valuable things you can do for your finances is take a step back and determine the handful of things that really matter to you, then cut back hard on everything else so that you have the resources to do those things.

If your car is not a part of those handful of things that really matter, drive your current car into the ground, then buy a replacement late model used of a reliable and economic make and model, then drive that one into the ground. If it’s not truly important to you, a Lexus with leather seats is keeping you from the things that are truly important to you.

If the exact food you eat isn’t one of those handful of things that really matter, just choose low-cost nutritious staples like beans and rice and oatmeal and make them the center of your diet. If it’s not truly important to you, artisan breads and hand-made cheese are keeping you from the things that are truly important to you.

If your home isn’t one of those things that’s really important, live in a small residence in a low-cost but safe area. If it’s not truly important to you, a large house in an expensive suburb is keeping you from the things that are truly important to you.

If golf isn’t one of those things that’s really important, don’t buy golf equipment; if you’re ever in a situation to play, just borrow some clubs and use a sack of cheap used balls. If it’s not truly important to you, a bag of expensive golf clubs and a bunch of boxes of great golf balls is keeping you from the things that are truly important to you.

If reading isn’t one of those things that’s really important, don’t buy books. If you ever need to read a book – perhaps to learn about a new subject or to get advice on something you do care about – head to the library. If it’s not truly important to you, a huge bookshelf full of books is keeping you from the things that are truly important to you.

If dressing sharp isn’t one of those things that’s really important to you, just buy some well-made easy to match and easy to care for clothes and don’t waste an extra second thinking about them. If it’s not truly important to you, a closet stuffed full of clothes is keeping you from the things that are truly important to you.

This same exact philosophy applies to everything you might be spending money on, from toiletries to garbage bags, from kitchen knives to DVDs, from books to video games, from magazine subscriptions to pocket notebooks. Whatever it is you spend your money on, it’s either supporting the things you really care about in life or it’s taking away from them.

Everyone has something different that they truly care about. I’m going to be the last person on Earth to tell you that you should care about the core set of things that I care about. I’m almost sure they’re going to be different than yours, though perhaps there are similarities.

But regardless of what those things you care about are, the core principle still holds true. Every time you spend money (or time or energy) on things that aren’t among the core things you care about, you take away from those core things.

To me, this is the essence of frugality. Frugality simply means that I’m cutting away from all of the things that aren’t at the core of my life so that I can appropriately fund the things that are at the core of my life. That means money, of course, but it also means time and energy.

Right now, your life is composed of two lists. One of them is a list of all of the things you spend money on above the bare minimum. Are you going to go through that list and make another one, the one that contains what truly matters to you? When you do, spending decisions become easy – you just cut back hard on the stuff that doesn’t matter and spend your money smartly on the things that do matter.

Until you do, you’ll be dumping a lot of your money into things that you don’t really care about, and it is those things that are holding you back from succeeding at the thing that you do care most about.

It’s all up to you.