Are You Under-Spending?
Overspending- we all know it when we see it, and it’s not hard to admit that it’s a problem and one we know how to address. But underspending? Not so much.
If you underspend, that means by default you’re saving and budgeting more, which means you have more money, and having more money is never a problem. But what happens is that we create regret, missed opportunities; we collect an avalanche of things we decided not to do or not to buy because we couldn’t convince ourselves to spend the money. Underspending is the reason I see people (especially later in life) with a big pile of money and an avalanche of regret. So often, families become wealthy because they are ruthless under-spenders and incredibly skilled in the art of self-denial. They restrict so much that they are almost proud of it. They feel some sense of accomplishment by spending as little as possible each month.
Over-spenders are shamed. They hide, they don’t understand why they overspend, so they keep doing it. The same is true for under-spenders, but they think their motivation is that it leads to more money and more money leads to more security. What I want to argue is these are both problems that are rooted in emotional disconnect. The over-spender is easy to identify. The under-spender, many times, is self-medicating an underlying fear. They worry that they will never have enough. They perceive any spending as a reduction in safety and confidence. It is not worth it to feel enjoyment or delight because it is much more valuable to them to feel secure.
Take a Vacation or Something!
I have these clients who have accumulated piles of money, and they’re terrified to spend it. They feel like they’re still not safe yet. It is so ingrained in their psyche that spending money on themselves is a bad idea, hard stop, and they shouldn’t do it. The over-spender can move towards a place of responsibility. The under-spending perpetuates itself because breaking that cycle feels wildly irresponsible; spending money on new clothes or a vacation is irresponsible when you should be budgeting that money. You have to start peeling away that assumption. How do you get from a place of under-spending to a place where you allow yourself to use the money that you acquired by under-spending? It’s a steep hill to climb because under-spending is what brought them success, but success is much bigger than not going out to restaurants or saving a penny. In many ways, when you get to the end of life and look back, you won’t feel glad you never did any of the stuff you wanted to do, and thank god you have all that money lying around.
How to Stop Budgeting and Start Living
Most gurus out there are telling you how not to spend money, but for those of you who are restricting and denying yourselves: you have a problem too. So how do you heal it?
First, get to a place where you can allow yourself to want things and experiences, a place where you’re allowed to desire delight and enjoyment in your life. If you are stuck in that under-spending cycle, you convince yourself that those things are not allowed. When it comes to this holistic financial planning, try making a list of 15 things you want. Connect to the idea that there is something out there that you actually would enjoy.
Secondly, connect to what you’re actually afraid of. What is the worry? What is the thought you’re having that if you spend this money, you’re less secure? That has to shrink for what you want to grow. Flip the script in how you mentally talk yourself out of spending by understanding that you are secure. When you experience delight, you gain security and confidence. You may be spending money that, in theory, reduces total security in terms of a financial portfolio. But at the end of the day you have gained security in your identity and the life that you want to live. Identify that trade-off to see that there is value in these other things too.
The third piece is not to fear change. So often, I hear from under-spenders, “I’m not gonna buy that now, it’s too expensive.” You didn’t buy it back then either when it was less expensive! The price of things changes, and that’s okay. Inflation is a thing-it will always exist. You can’t argue that this thing should cost what it cost 15 years ago. If you want it today, this is what it costs, go pay for it. Stop talking yourself out of it, or you will trap yourself in a loop of always saying you should have done it back then, and oh, now it’s too late.
Using this holistic financial planning approach for under-spenders, I like to help them start small and focus on experiences. Use your budgeting skills to account for ways to use that money you have been collecting. We can connect to the value of experiences more quickly, like with memories and pictures we take from a vacation or a trip. You can grab hold of the fact that that was really worth it and that you experienced a lot of enjoyment and delight. Get excited about that opportunity to have a shared experience. That anticipation is what will allow you to keep going. Allow yourself to experience that thing separate from the thought of how much it costs. In the midst of what they said they wanted, under-spenders will tell themeless that it was a waste of money. This leads me to the last step.
Keep some kind of record. Whether it’s photo albums in your phone or a journal, have something visible to you; some log or list. When you are an under-spender and start to unlock this enjoyment, write down how that was a really good use of money, how it was a beautiful way for you to spend those resources. You can unlock that confidence to try another one and then another one. Remember that trip you took? Remember how great that felt? You might forget those things through your own conditioning of under-spending. You almost have to do the work over again. If you can keep some of the memories, if you can reminisce, planning the next one is always easier because you can prove to yourself that your default position of spending money always being a bad thing is not accurate.
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