The COVID-19 pandemic has reshaped our lives in unprecedented ways, forcing us to stay at home more, adjust our spending habits and even reevaluate our retirement hopes and dreams.
And as we enter the dog days of late-August when many of us would normally be preparing for kids or grandkids to go back to school, we’re reminded that many of our schools are still closed and businesses are still shut down – bringing untold financial stress to millions of Americans.
But let’s take a moment and examine how COVID has changed our relationship with spending money. And embedded in our answer lies the often-uncomfortable topic of whether we have a healthy relationship with money.
In our quest to understand our relationship with money, we need to be careful that we don’t develop a fear of spending. To conquer this unhealthy fear, align your spending with what you value.
Money & Spending Fears
As a financial advisor, I cannot emphasize enough the importance of saving, but if you cover the basics, like having an emergency fund and saving consistently for retirement, spending money on yourself sometimes is no crime. Ultimately, money is a tool that helps us to do things and enjoy life. There is no reason to deny yourself happiness because you’re paralyzed by money fears.
As long as you are not up to your eyeballs in debt, you can allow yourself a little fun here and there. The key is to do it responsibly by creating a comprehensive financial plan and identifying what truly makes you happy.
If you have a fear of spending, take these following four steps:
1. Create a Plan
It should outline how much you bring in, your expenses and savings. Knowing what you can afford can alleviate your stress when you’re concerned about cost.
2. Identify Your Values
What makes you the happiest? Money can create happiness if you use it wisely. A general rule of thumb is to choose experiences over things. Material possessions tend to lose their luster shortly after you purchase them, whereas memories of a fun trip with family or friends last for years.
3. Prioritize Your Spending
What’s more important to you? You must prioritize your spending so that you can enjoy your discretionary income fully. For example, if a vacation with your old friends is your top priority, you can skip a happy hour out with coworkers. Conversely, if building good relationships with coworkers is more important, then allow yourself to spend money on events that bring you closer to your goal.
4. Spend Your Time
If you can’t think of anything you’d rather spend your money on, maybe it’s not about the money. Think about a cause that means a lot to you and offer your time and skills to it. For example, most animal shelters need volunteers to walk dogs or clean up the facilities, and other causes might need your help to fundraise. Be open to whatever they want you to do.
Sometimes, what makes you happy costs very little, but sometimes, you have to spend more to realize your goals. By determining what is important to you, you can enjoy life and take care of your future at the same time.
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.