I stood nervously at the counter as the cashier rang up my purchases. I had just picked out a few new clothing items for myself and was anxiously waiting for that menacing grand total to pop up on the screen that was facing me.
“Alright, that’ll be $183.47,” she said with a friendly smile, as I tried to swallow that lump that was growing in my throat. Why? Well, let’s face it: I felt guilty. Guilty about spending money that, in all reality, was mine to spend as I saw fit.
Spending is not a financial strategy that many people tout.
Of course, these items were things that I wanted. I definitely didn’t need them. And after a lifetime of sitting through my dad’s countless lectures about “wants and needs” and hearing how important it was to save for a rainy day, my financial conscience was quite literally screaming at me.
“Why are you dropping your hard-earned money on these things? Think of all the more important things you need to pay for! What are you doing?”
Sound familiar? If you’re somewhat conscious of your spending and responsible with your finances, I’m sure you can relate to that feeling of guilt and self-doubt whenever you treat yourself to something that didn’t quite make the “needs” list.
And to a certain extent, that nagging conscience is a good thing. After all, you’d never want to swing so far in the splurge direction that you wind up with no money to your name.
However, as with anything, I’ve learned that the best financial strategy involves a delicate balance.
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Finding Balance in Your Financial Strategy
Yes, saving is important, but that doesn’t mean you should be so strict that you never allow yourself to actually enjoy the money that you accumulate.
And many experts agree. “Few people would willingly maintain a lifestyle devoid of wants on a long-term basis, says Peter Neeves, Ph.D., a financial literacy expert. “We’re satisfaction maximizers. We naturally seek to achieve the most pleasure possible. We can accept short-term pain for long-term gain. But we don't want to stay there. We need balance.”
The Temptation of Extremes
Unfortunately, we live in a world of extremes, which makes walking that fine line relatively tough. Either you’re in a free-spend zone or you’re pinching every penny. Either you’re on a strict diet or you’re indulging in an entire pint of ice cream.
Let’s just say that many of us have a hard time with the middle ground.
I know that this balance becomes increasingly tough to navigate when it comes to your own money. I’ve talked before about that intoxicated feeling I get watching the checks roll in and that balance in my savings account grow. However, what good is that large sum of cash if I never actually do anything with it?
Having an emergency fund and enough to cover my monthly bills is one thing — I always make sure to take care of those things first and foremost. But if I have a little extra left after doing that, I feel somewhat entitled to use it on things that make me feel happy and fulfilled.
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Work Hard, Play Hard as a Financial Strategy
It’s for this very reason that the sentiment of “work hard, play hard” has not only become my unofficial approach to life, but also my philosophy about my own finances.
I work like a maniac to bring in the money, so you can bet I’m going to reward myself with a few unnecessary purchases and experiences every now and then.
If you often find yourself falling into the same guilt-inducing trap that I somehow always wander into, consider this your friendly reminder: You don’t work your tail off so that you can collect huge piles of cash just to let it all sit there and watch it grow.
You deserve to work to live, and not live to work. And, remember: You can’t take the money with you in the end, anyway.
So absolutely pay your bills, save for a rainy day, and invest in your future. But if you have some left over when you’re done with that? Go out and have a little fun. You’ve earned it.
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What Is a Need vs. a Want?
Where do you draw the line between spending on yourself healthily versus acting recklessly? Let’s get clear.
What’s a Need?
A roof over your head, food, basic clothing, and personal hygiene products are the most basic human material needs. That said, depending on your life circumstances, you may have even more needs. For example, an insulin-dependent diabetic must have insulin to stay alive. The items in this category are the nonnegotiables.
Also belonging in this category is any debt you owe, whether it be on credit cards, student loans, or quarterly income tax.
Now make a chart. Add up the cost of those monthly needs along with your monthly debt payments and put that figure in column A.
Next, write down your sources of income. This includes your salary from your job or your side hustles, dividend income from any investments you might have or other streams of what’s known as passive income. Add those up and put that figure in column B.
Now compare column A and column B. If your needs and debts are larger than your income, you will need to find more income.
If, however, column A is less than column B, and you are saving money both toward your retirement and an emergency fund, you could have some money to have fun with in the near future if you choose.
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What Is a Want?
Remember the famous line from the movie The Shining? “All work and no play makes Jack a dull boy.” Ok, maybe that is an extreme version of no self-reward (and let’s face it — he clearly had some other things on his mind), but there’s no denying that work with no reward is drudgery.
“Wants are a great tool to motivate,” Neeves says. “We can better accept present sacrifices for future gains if we’re getting some pleasure now.”
Using Wants in Your Financial Strategy
With that in mind, decide what is it that motivates you. Make a list. Some people like mood boards. Whatever works for you to set your goals up and decide in what order you want to work on them.
There really is no “wrong” want if you are acting financially responsible. Meaning if you are earning, investing, saving, and putting some money into an emergency fund for a rainy day, and you decide to give yourself an allowance for shoes, a fishing pole, or a vacation, go for it without guilt. It’s also nice to give to others as a part of financial wellness, but we’re not here to get preachy.
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As Neeves says, “Sacrifice-reward is a sustainable cycle.”
Just make sure your reward doesn’t come before your sacrifice. For example, don’t buy an Apple watch to inspire you to exercise. Exercise first, meet a fitness goal, then buy the watch.
Most importantly, make sure the reward fits the action. Awarding yourself a pair of $250 tennis shoes because you arrive at work on time every day for a week — something you should do anyway — is heading down a slippery slope.
“It's probably okay to blow a hundred dollars as a reward for saving an extra thousand,” Neeves adds. “It's not okay to blow a thousand as a reward for saving a thousand.”
The next time you’re struggling to find balance with your spending, keep these tips in mind. There’s no reason to feel guilty if you’re thinking through your money moves.