“That’s a waste of money.”
How many times have you heard that? How many times have you said it?
When you’re trying to get out of debt and build a financially stable life, it’s hard to justify spending money. In fact, there’s a good chance you feel like you have to pretty much avoid buying anything in order build up your financial resources.
Even after you reach a degree of relative financial stability, it’s hard to overcome the guilt you might feel when you spend money on something unnecessary or “fun.”
But do you really have to stop spending to be financially stable? The problem isn’t that you spend money, but figuring out what to spend money on.
Is your money script holding you back?
Brad Klontz, Psy.D., led a group of researchers in creating the Klontz Money Behavior Inventory. These researchers reviewed and cited various studies pinpointing different money behaviors that have negative impacts.
Some of the research indicates that it’s possible to hoard money to the point that it’s detrimental to your psychological health. Meanwhile, self-denial and a fear of spending money on anything can keep you from enjoying your life and even strain on your relationships.
While there’s nothing wrong with being frugal and practicing what Klontz and his fellows call “money vigilance,” the fact of the matter is that it’s possible to take things too far.
Moving into “miser” territory, and letting it get to the point that you refuse to spend any money you don’t have to, can be just as damaging as overspending in some ways.
Rather than focusing on stopping all spending, the key is spending money wisely. There’s nothing wrong with spending on things you enjoy and that enrich your life. You can even still reach your financial goals when you cut spending the right way.
Mindset shift: money as a tool
My “aha” moment happened when I realized that money could be a tool for me to use. I didn’t need to keep all of it hidden away. Amassing a huge net worth wouldn’t make me happy.
After all, what’s all that money for?
I shifted my mindset away from the view that money is something to get so I have it. Instead, I see money as a tool that helps me prepare for the future while enjoying life today.
While I want to save for the future, I also know that the amount I’m setting aside each month is probably more than enough to do the job. I don’t see a need to “over-save” at the expense of actually living my life today.
Once you see money as a tool that can help you achieve a lifestyle you enjoy, it becomes easier to let go of some of that money in the form of spending.
As long as you have a plan to stay out of debt and spend within your means, there’s nothing wrong with enjoying life and using your money on worthwhile expenses.
But what is a worthwhile expense anyways?
How to decide what to spend money on
Healthy spending habits start in a place where what you value matches the way you spend your money. Take a few minutes to figure out what matters most in your life. What gives your life meaning and purpose?
My priorities and values center around raising my son, fighting for community causes, and being able to travel. I also like preparing for the future and building my financial stability.
If you want to learn how to spend money wisely, start by understanding yourself. There’s nothing wrong with having priorities that are different from someone else’s. You just need to know what matters to you and what will help you achieve your own goals.
Once you know what matters to you, whether it’s becoming debt free so you can go on a dream vacation, or putting your kids through college, you can start building your spending plan around that priority.
If an expense doesn’t match your values, priorities, or goals, consider cutting it in favor of the spending that will get you where you want to be.
Carl Richards, the author of The Behavior Gap, suggested in an interview with me that every time you go shopping, it makes sense to pause, look at each item you put in your cart, and say, “that’s interesting.”
The idea is to call attention to the things you buy. Take a look at the item and think about why you’re adding it to the cart. Do you plan to use it in your meal prep this week? Will it make a good gift for someone? Did you just grab it because you thought it might be nice to have around?
After you’ve thought about why you added the item to your cart, it’s a good time to consider whether or not the reason you’re buying it is worth the cost.
Is it moving you forward toward your goals? Will it actually be used? Does it bring real meaning or satisfaction to your life? Is it in line with your values? If you can’t answer yes to these questions, put the item back.
Spend on the things that actually bring meaning to your life. Don’t feel bad about having that latte if it’s something you really look forward to each day.
And it’s ok to save up for a great vacation and enjoy yourself while you’re on it. It’s also ok to save for retirement while you pay down debt and occasionally eat out.
Buying something frivolous doesn’t mean you don’t know how to spend money wisely. It’s only a poor purchase if you go into debt, or if it’s not something you really care about.
Decide what to spend money on ahead of time and bring your spending in line with your values. You’ll find that you can enjoy your financial resources and still build a stable foundation for the future.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|