One topic within personal finances that doesn’t get discussed often is how spending money is perfectly okay. A recurring theme in the finance industry is how small purchases add up over time and are detrimental to your finances. But, you shouldn’t feel guilty about spending money if it improves the ROI of your life and you have a spending plan (some sort of budget).
Where Spending Money Creates Trouble
In America, there certainly is a debt crisis abound. While much can be attributed to student loan debt, it’s only a portion of our woes.
For example: “Total revolving credit balances are $1.03 trillion as of January 2019. The figure, reported monthly by the Federal Reserve, is the total amount of revolving credit balances reported by financial institutions, the overwhelming majority of which are credit and retail card balances, according to the Consumer Financial Protection Bureau (CFPB). “
As you can see from that data, consumer debt in America is insane and it seems we have a bit of a consumption problem or impulse buying issues. Often, people are spending too much money to keep up appearances. Yet, here I am telling you it’s okay to spend money. Uh, okay…
But here’s the thing, it’s fine to spend money but you do need to get your financial priorities in place or you’ll easily become a statistic. There are a few reasons though, where spending troubles begin.
Lifestyle Creep
Lifestyle creep or “lifestyle inflation” occurs when your standard of living grows with your income rising. And what you might have seen as luxuries in the past, are now becoming necessities in your life. Since you have more income at your disposal, temptations slowly pique your interest or you tend to buy more expensive items because you can afford to, even if you don’t need it or doesn’t add value to your life.
Trying to Keep Up with Joneses
I’m sure you have heard this before, sorry to include this cliche phrase but it’s valid. We want to keep up with friends, neighbors, and what others have for fear of being left behind. Even if this means overspending and buying things that add no real value personally. Friends or family may also guilt you to buy something by saying things like, “You don’t have this yet?” or “Oh, you have to upgrade to XYZ.”
Maintaining A Consumer Mentality Only
Having consumers is good for the economy and like I mentioned earlier, spending on things that bring you joy in your life is totally okay! But the problem becomes if you only have a consumer mentality. Shopping can be addicting and making purchases is so easy today. All it takes is one click, thanks to places like Amazon and other online stores. The convenience factor is amazing, but it makes it too easy for everyone to over-consume.
Figure out better spending habits or stop spending all together if your shopping is causing you to go broke. I’ve personally unlinked accounts like on Amazon so I’m not tempted to just browse and shop when I’m bored. You can also unsubscribe to emails too.
Lack of A Spending Plan
And here is where consuming can really be controlled, if a plan is developed. No one should tell you what or how to spend your money, but you must decide what is important. Your financial security now and in the future matters.
A lot of times we make purchases for the instant gratification because we see something, we like it, and must have it. I can’t tell you how many times I did this in my early 20s, even if I did not have extra money to spend. No thought goes into the purchases other than we want it now.
However, developing a simple spending plan can help remove consumer debt, improve on a lack of savings, and provide you with consistent money saving tips.
How to Spend Money Guilt Free
The big caveat to spending money, is you really need to have a spending plan where you set aside a certain amount of money. But not like a traditional outline you may see with budgets or other finances.
Instead, it’s about asking yourself the important questions about how you want to spend your money.
This means your plan is unique to you and is exactly why you should not feel guilty or shamed for your purchases.
The basics of your spending plan should answer:
- What do I value most for when I spend money?
- Where am I overspending, that can be cut and I wouldn’t miss?
- Do I purchase things I could find cheaper? Used? Or borrow from someone? (Practicing more frugality)
- How does spending money on XYZ impact my ROI of my life?
- Am I paying myself first before spending, or do I rush to buy things because I want it now?
- Am I spending money too quickly without thinking about why I’m buying said item?
- How much money should I be spending? Am I covering my living expenses without stress? Or do I need a plan to stop spending so much?
These questions help you understand where your spending priorities are, where you might be overspending, and ways to cutback on things that aren’t as important to your life as you may have thought.
The challenge here is getting in the habit to think about spending more analytically. And to start to process and think purchases through, instead of via your impulses.
If you need, start outlining these questions with answers and align it with your current state of finances. You get the bigger picture and it can make you think more about what matters to you in life most.
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