“Plan as if you’re going to live forever but live as if you’re going to die tomorrow” – Unknown
I’ve realized since I starting working in Financial Services that many people carry a certain amount of guilt when it comes to enjoying your money. Conversations which involve tales of “frivolous” spending on “things of no substance” such as vacations, shoes and amazing technical gadgets tend to also include some fervent justification on the part of the buyer about why spending that amount of money on something that wasn’t an investment product or some other savings vehicle was absolutely the best thing to do. I’m not sure where we got the idea that spending money on ourselves is “bad” (probably the same place that we learned to feel embarrassed about earning more than the average salary) but given the number of stories I hear about people who delayed their fun until later in life only to get sick or die before they could actually enjoy it, I’m going to go out on a limb and suggest that adding “guilt-free fun stuff” to our monthly spending plans might not be a bad idea!
A friend of mine bought a new house last summer. Rather than taking all of the equity that had accumulated in her old home and apply it to the new one, she decided to use some of it to put a pool into her new backyard. She knew that adding a pool wasn’t going to make a dramatic difference to the value of her new house but she had wanted a backyard pool since she bought her first home 20 years earlier and she reasoned that this might well be the only time in her life when she would have $40,000 in her hands that wasn't needed for some other purpose. She decided that the joy of finally realizing that dream and the pleasure she would get from having a pool would be more than worth the $40,000 price tag.
It's not always about the money
Reactions of friends and family varied wildly but the general consensus was that spending money on something that wouldn’t generate a return on investment by increasing the value of the house was a bad decision. She went ahead and put the pool in anyway and stands by her decision; for her the “joy factor” far outweighs any guilt she has about the purchase and of course, even though they don’t quite agree, her friends and family are loving using the pool this summer!
Keep it in moderation
The key seems to be, as with most things in life, that there is nothing wrong with fun spending in moderation. A pool sized splurge every year might run you into trouble but a pool sized splurge once in 20 years, using money that hasn’t been purposed for anything else, is just going to make you happy. Similarly, indulging in a weekend away or a wonderful meal in a fancy restaurant isn’t going to throw your retirement plans wildly off track, as long as you’re using money that is purposed for “fun”. The trick is to make sure that you build that fun component into your monthly spending plan, make conscious decisions about how best to spend it to maximize your enjoyment of it and resist the temptation to splurge using dollars that were intended for something else. I don’t mean it to sound as if you should always carefully plan your fun; I am a huge fan of spontaneity but I’ve discovered that if you take the spontaneous route all the time it has a habit of becoming more expensive than you intended so it’s best to balance it out with some forward thinking!
Don't forget to enjoying your money
The advantage to enjoying your money along the way rather than storing up all the fun for the end of the journey is that you tend to be happier, less stressed and more likely to stay on track with your financial goals. In the same way that someone who makes healthy eating choices most of the time but doesn’t hold back from indulging occasionally tends to be in better shape than someone who is in a “yo-yo” dieting pattern, so people who build enjoying their money into their spending plan tend to be in better financial shape than those who keep themselves on a strict budget for months or years at a time and then fall off the wagon in dramatic style once the restrictions take their toll.
What do you think? Is it better to work hard, save hard and then enjoy the fruits of your labour in retirement or should you make time enjoying your money along the way and continue to do so in your later years? I’d love to hear your thoughts!