For many, they’ve become wealthy because of their focus on saving. They’ve spent their entire lives being disciplined and saving their money. Then, there comes a time when they need to spend it, and that can be a difficult transition. On this episode of Your Life Simplified, Valerie Escobar, senior wealth advisor, is joined by Abby Foster, wealth advisor. They share ways you can eliminate guilt from spending and still reach your goals.

Transcript

Valerie: Some of our best clients have become wealthy because of their really great habit of saving. They’ve spent their entire life just being really disciplined about that. And then there’s this weird crossover point for them where they now need to start spending, and that is something that can be tough. Today’s episode is focused on that group of people.

I’m Valerie Escobar, and you’re listening to Your Life Simplified. I am joined today by Abby Foster, certified financial planner. Hi, Abby.

Abby: Hello.

Valerie: Thanks for joining us. Today, we are going to talk about guilt and spending. Abby, you ever felt guilty in spending money?

Abby: Only every day of my life.

Valerie: I thought this one was great because I know we talk about this one a lot.

Abby: Often.

Valerie: Spending is tough. We wanted to dive into why and what we can do to jump over that hump of getting over our guilt. And really, I think one of the main sources that clients and we personally feel that is just that we feel like we just don’t have enough money. Have you noticed that?

Abby: Yeah, when I don’t fully have enough saved for the goal yet, I feel like I can’t even spend a little bit towards that goal because I don’t have the full amount fully saved yet.

Valerie: Right, right. And so, what do we think… How do we get past that? What’s the first step on that one?

Abby: I mean, this is a typical wealth advisor response, but really focus on the financial plan. As long as there’s a plan in place to achieve that goal and you’re disciplined in saving X dollars per month for that goal, or setting aside this money per month or per year, per quarter for that goal, then that can really help as far as, “Okay, I might not have all the money today, but I know I’m taking the steps towards getting to that point, and so I can spend fearlessly because I know I’m doing everything I need to be doing in order to achieve this goal.”

Valerie: Right. And I think with our financial planning software, it’s really fun because we can put a toggle, a thing that says, this is my want, and then you can turn it on and say, okay, it does reduce your cash, but it’s okay.

Abby: Right, right.

Valerie: And so I think, for me and for clients, really creating a budget and saying, “Okay, I am going to go on a trip. I’m going to spend $10,000,” whatever it is you’re going to be spending and saying, “Okay, now I give myself permission to do that and to go ahead and just pay for that.” So, some strategies around that. How specifically do you implement that?

Abby: Yeah, I think for me what is easiest is when I prepay for as many things as possible, especially for a trip. I mean, there’s the flights you have to buy ahead of time. Typically, your accommodations you buy ahead of time. Any excursions or sightseeing trips, you can a lot of times buy tickets for those ahead of time. And so the money’s already spent. So once you’re there, it’s really just the little things like food and taxis and things like that. So most of it’s already gone. And so the guilt, if you will, has already passed because the money is spent, it is what it is, and now you just get to live life and enjoy what you’ve done.

Valerie: Yeah. And I think a lot of times, and this is on the opposite side, is that guilt comes with the actual transaction. So it’s like here you’re presenting your credit card, you’re like, I don’t want to. And so it works the other way, too. You’re like, I’m an impulsive spender, and so if I spend more time thinking about the actual transaction and that’ll help me not. And so now we’re looking at it on the flip side, play it ahead of time.

And I think, too, with that is looking at having a specific spending account. Oftentimes, we have lots of buckets. I like to have little buckets, and this is my trip bucket. So I’ll spend or I’ll fill it up. And so then I’ll say, “Okay, now it’s filled up. It’s where I needed it to be. Now it’s time to empty it back out,” which can be satisfying.

Abby: Right. Yeah. When you’ve specifically set aside money for a goal and now you are implementing that goal, I think there’s less guilt associated with that because you knew the purpose behind those dollars. Maybe it’s even in an account that has a name, Ireland trip, El Salvador trip, whatever it is. And then, when you’re actually spending those dollars, you’re like, yes, I’ve achieved this goal. This is me actively achieving this goal by spending this money.

Valerie: Right. There you go. Yeah. So we’re just chalking off the list. I think those are the same type of people that are checklists people, too. So that’s doubly good. Okay. So guilt, that’s a big one. And maybe the next one is a little bit guilt related, but another big reason that we see clients struggle with this. What do you think?

Abby: I think a lot of times there’s this concept of, well, I don’t want to spend it all today because I want there to be something left for my heirs, for my descendants. I don’t want to spend it all now because I want to leave something for them. I think that’s a big one we hear about often.

Valerie: Yeah. And so when we think about “I want to leave it for my kids,” I think everybody feels that they should be doing as if that’s their main responsibility is to absolutely take care of their kids, which that’s a great feeling. It’s a great goal to do that. But maybe instead of saying, “Well, I absolutely have to send it to them,” then yeah, give it to them, but spend it now. Don’t worry about it being their inheritance. Instead, give it to them as they’re needing it. Their kids are maybe… They have kids that are little and you want to spoil them, or they’re planning a wedding or buying a house, something like that.

Abby: I know. I feel like if you ask any child of one of our clients if, “Hey, are you expecting an inheritance from your mom and dad? Or would you rather see them spend and enjoy this money?” I think nine times out of 10, all of them would say, “Oh no, they should spend their money. Don’t worry about us. You saved this money. Please use it for yourself.” I think a lot of times that’s what we would hear from them, and the clients would have no idea.

Valerie: Absolutely. Yeah. And again, and to that point, too, I think most kids of clients would say, “Well, if there is an inheritance, I kind of need it now, because now is when it’s a little bit tougher.” And so, kind of works on both sides, I think.

Abby: And as a child of parents, I don’t expect anything from my parents because they have given so much to me throughout my life, even just raising me and loving me and doing all of that for me, paying for college, paying for my wedding, things like that. I am forever in their debt for those things. So I don’t expect anything else from them. I’m grown now. I’m my own person. So I don’t think that they owe me anything else.

Valerie: Yeah. And the idea of thinking, man, my mom is depriving herself for the future me to be able to have something, that’s just terrible. I don’t like that idea at all. So yes, please spend on yourself. Let’s see, next piece.

Abby: Well, I think, in addition to giving to kids or feeling the pressure that they need to save their money to give it to kids in the future, also, some folks think, “Well, I shouldn’t be spending this money on myself because it could be going to the less fortunate, it could be going to charity,” which is a very noble thing to say and do, absolutely. I’m not going to discourage anybody from giving to charity. Please give to charity. Although, really, at the end of the day, I don’t see many clients saying, “Okay, well, I’m not going to go on that $10,000 trip because I’m going to give $10,000 to charity.” Usually, it’s either they spend it or they don’t. It’s not a matter of one or the other, charity or spending it on the trip.

I think, and maybe a way to assuage that guilt could be to build giving to charity into your budget, into a monthly, quarterly, annually giving schedule. And that way, you feel like that box is checked, that base is covered, and you know you’re doing good throughout your whole year rather than just in this one instant when you’re feeling guilty about spending money on a trip. You know, “Okay, I’m doing what I want to be doing there. I’m giving to the people I want to give to, and now I can guilt free spend the rest of my money on myself.”

Valerie: Absolutely. Yeah. And there’s really a lot of fun strategies around how to be really strategic in charity giving. So let’s implement that over there, but then we’ll spend and have fun on the other side, too. So balance is always good.

Abby: Absolutely. Yeah. It doesn’t have to be one or the other. It can be both.

Valerie: I think, too, and this is… We talk about money, I guess “money scripts” is the term that we put on it, and just the way that we perceive money. So one of the things that I’ve noticed is that if people spend their money, it kind of makes them bad. You notice that?

Abby: Feel bad?

Valerie: Or feel like they’re… Yeah.

Abby: Like they’re a bad person.

Valerie: Right. Yeah. And so I think that if we’re thinking about… we’re giving to charity, we’re helping our kids, and really, if we think about, well, what’s the purpose of my money? I think one of the things is that when we have these experiences, there’s a lot of value that we get out of that. And we can almost think of it as paying dividends, that when I invest my money, I get dividends to help me live. When I go on a trip with my kids, I’m getting dividends that are those memories that are just going to stick with me forever. And so I think that’s extremely value.

And also, sadly, and I know this is for us, personally, we’ve seen clients that they’ve said, “Nope, tomorrow, tomorrow, tomorrow,” and then, all of a sudden, tomorrow doesn’t come, and there’s a tragic event and it’s just made it impossible. Maybe there’s a disability or even a death, and so it’s just not going to happen.

Abby: Yeah. There’s definitely a balance between spending today and saving for the future. And so, for the most part, our retired clients have done the hard part. They have saved for the future, but the future is now. And so they have to think of, “Okay, I’m in a different stage of life now. This is my spending stage of life.” There’s obviously a balance there, and that’s where the financial plan comes in. How much is too much to be spending, and we’re really good at telling clients, “Nope, you’ve hit your limit for the year, for the month. We got to knock it back a little bit,” but it’s a balance, definitely, between spending now and spending later.

Valerie: Yeah. And let’s see, what else are we going to talk about?

Abby: I think just going along with your point about travel and experiences in particular, having value, it might feel particularly difficult to shell out a large amount of money for a single purchase, whether that’s a trip or a new car or a home renovation project. Something like that can feel especially guilt ridden just because it has such sticker shock, such a large dollar amount, and I would say you’ve determined that this is something you want or you need. And so when it comes to actually spending the money, focusing on the good things that come from it, the inherent value that that item has.

So maybe instead of saying, “Oh my gosh, I’m spending so much money on this new car, you say, “You know what? It’s worth it to spend this money on this car because I am buying reliability. I am buying my ability to get to things on time, to show up for my family, to drive my grandkids to the park.” Whatever it is, think of how you are going to use that new asset and the joy and value it will bring to your life and focus on that part. And that makes it a little bit easier to stomach spending the money when you know what it’s for. I think that’s just the moral of the story is to give your dollars purpose. And so think of what that purpose is before spending the money.

Valerie: Yeah. And so it’s like considering it an investment. So it’s not like it’s gone, but you invested in transportation, in a home, and something that… I mean, with cars generally, they don’t necessarily retain their values, but a second home, if that’s in your plan and it works, that is something that could have value in the future.

Abby: So just thinking about why, your reason for it.

Valerie: Yeah, absolutely. This, of course, is not a problem that everybody has. There are both sides of it. And so how do you know the difference? How do you know if you’re somebody that has a spending problem or, i.e., you’re spending too much versus a spending problem, I’m not spending enough.

Abby: Right. They’re both spending problems or lack of spending problems.

Valerie: Yes. Yes.

Abby: I would say it comes down to is the thing that you’re buying necessary? Does it bring you lasting joy? Really, at the end of the day, does it have purpose? What is your reason for buying this? I think if it was a clothing item that you’ve saved up and that you’ve really had your eye on for months, and then you save up and you finally purchase it, it feels a lot different than, “Oh, I had a bad day. I’m going to go shopping” or “Oh, I just clicked the button on Amazon and whoops, it’s at my door now.” That’s how you… the impulse buying is kind of how you end up with a bunch of stuff you don’t need and doesn’t bring you joy. And then I think it makes sense to feel guilty about that sort of spending, but when you’re spending money on things that really bring value to your life, bring value to others, that’s money that you don’t need to feel guilty about spending.

Valerie: Agreed. And if it’s going to bring you stress in the future, it’s like I spent it and now it’s like, well, how am I going to pay for it? Or now I can’t retire on time. Something like that, that’s going to be another big thing. So the clients that we’re talking about, absolutely your plan is going to work fine. This is something that it was really built in, and so there’s not going to cause any strain or stress. So always our goal, I think, is just to create as stress-free of a life as possible, and using that money to as the fuel to get there.

Thanks, Abby. I think this was wonderful. Hopefully, our audience all got something good, some good tips out of that. Thank you for joining us on Your Life Simplified. I’m Valerie Escobar. Make sure you subscribe and follow wherever you listen, and we will see you next time.

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