Spending vs. Saving
Financial planning for living well is a balance between your needs and wants today, and your needs and wants in the future. Neglecting your today self can be just as detrimental as neglecting your future self! Your goal should be to live within your means while using money as a tool to maximize your happiness throughout life. While most financial advice is aimed at helping you reduce spending and increase saving so you’re not a servant to debt, it is possible to become a servant to your budget if you’re constantly denying yourself in the name of saving for your future self.
Here’s how to avoid both traps.
Avoiding consumer debt and buyer’s guilt to be self-assured in spending comes down to intentional spending. Intentional spending is thinking strategically about how to get the most out of your spending experiences, i.e. cutting out impulse buys and discovering what you value most in life. It’s planning your money habits to pursue what makes you happiest.
Think back over the last five years. What purchases brought you the most happiness? It could be really good food and drink enjoyed with friends. It could be the latest technology. It could be travel, or artistic pursuits, or ethically sourced high fashion, or pursuing multiple hobbies. Regardless of what you love most in life, its cost will need to be fitted into your disposable money after saving. This may mean your intentional spending more resembles short-term saving for bigger ticket items. But that’s OK! If you are confident and passionate about your intentional spending, it becomes easier to save up to spend.
You might want a simple map to know when you’re ready to make intentional purchases. If you meet the following conditions, you’re probably in a good place to spend instead of save:
- Your basic financial needs are covered, and you’re not going into debt to pay for lifestyle and everyday living expenses.
- You have an emergency fund of three to six months’ expenses.
- You are actively paying down debt beyond minimum monthly payments or have no debt beyond a mortgage.
- You are saving for retirement.
Now, those last three points may take a while to achieve or achieve regularly. That doesn’t mean you can’t spend money outside of those goals during that time. It does mean you should limit spending until you’re there.
Intentional saving means you’ll have a high likelihood of getting the bigger-ticket and longer-term things you want in life while not pushing yourself to be an extreme miser in the process. It’s understandable that getting out of debt and seeing saving and investment balances grow can be addictive, but if you’re not careful, self-denial and penny pinching can become an unhealthy obsession that robs you of joy in life.
To become an intentional saver who can still enjoy life, take each saving goal and decide:
- How much money you will need to save
- When you will need the money
- If you will save or invest to achieve the goal
This will help you avoid saving just for saving’s sake. If your savings goals are being met for retirement, an emergency fund, a down payment on the house or new car, etc., you should feel confident in relaxing the reins on your saving.
If you didn’t pick up on it yet, spending and saving with intention is about balance, assessing goals, and knowing thyself. Hopefully that makes pursuing financial health less scary and more about getting more of what you love in life!