The journey to Financial Independence can be a long and arduous one.
Depending on your circumstances, we’re talking about a 10 to 40 year timeline here. A lot can happen during that time. Heck, that can be an entire lifetime for some people.
With that kind of time frame, you want to make sure whatever lifestyle you choose, it’s one you are comfortable and happy with. There’s no use getting to Financial Independence, only to find out the cumulative stress from the journey has ruined many aspects of your post-FI life.
The problem here, of course, is that many people just starting out on their FI journey have a tendency to over do it a bit.
A lot of advice in the personal finance space revolves around getting your finances in order, by decreasing your spending and/or increasing your income and rightly so!
However, this advice can ignore some of the hidden downsides of decreasing your spending.
The Downsides of Decreasing Your Spending
When people decrease their spending, they’ll often take a hard look at their finances and what they spend money on, and reduce or completely remove consumption on all the things that aren’t necessary.
All of this is done in the name of reaching some arbitrary spending level, or desired savings rate.
Don’t get me wrong, this can be great, and it’s so awesome to see how some people realize that their current spending habits aren’t making them happy so they make a change, or that some people can double or triple their savings rates just by making a few adjustments to their lives.
Despite this, after dropping down their spending levels, there comes a time when many people find they can’t sustain it.
Changes naturally occur in life, and when the Financial Independence journey can stretch decades, don’t be surprised if your preferences end up changing several different times.
But once you’ve established a minimum spending level and know you can spend that little, it can be tough to get yourself to spend more.
You may feel guilt that you are spending money when you could be saving it. Maybe you feel like an impostor for spending money on things that people in the FI community preach against. Perhaps shame that you spend more money than others pursuing FI.
You may even find yourself declining or opting out of certain things to avoid spending money. Maybe you always skip going out to lunch with friends or coworkers, or choose to pass on a fun event with family simply because you wanted to save some extra money and not spend it.
This isn’t necessarily healthy behavior, skipping things you like, or would want to do, simply in order to save money. I’m not advocating to go spend money on all the fun things you’d like to do, but if you are always declining to spend money on things you enjoy or value, you may find that life becomes unfulfilling.
Spending and saving money can have a lot of emotions tied to it, whether you realize it or not.
Give Yourself Permission To Spend Money
In order to help combat these negative emotions tied to spending money, you need to give yourself permission to spend money.
Very few people want to actually live on just necessary expenses and spend nothing on fun, discretionary expenses (if you are the former, maybe Early Retire Extreme is a better blog for you to read!).
But what is the best way to do this, while keeping your spending within reason?
The best way I’ve discovered that helps me to combat all the negative emotions around spending money is to use a budget. I know what you’re thinking… budgets can be extremely restrictive and limiting depending on how you use them.
However, the method I use for budgeting is much more freeing and liberating. Instead of being shackled to an ever changing target budget that is specific to each month, I take a broad look of what expenses by category I have and/or want to have during the year and evenly spread that throughout the months.
While the necessary expenses (like my $135/month grocery bill) are mapped out based on what I know I need to spend, I had a lot more wiggle room with my discretionary expenses, like Entertainment, Travel, Restaurants, etc.
If I was all about racing towards the finish line on this journey to FI, I surely would have kept these categories as low as possible to save as much as I could.
However, I know that spending that little on Entertainment and Travel is just simply not my ideal life.
Had I set my budget down really low for these categories, I would have felt very guilty each month when I inevitably went over that amount. The guilt would lead to unhappiness, and maybe even to spending even more money than I’d like (ie. well I’m already over budget so may as well spend money on this thing…)
By being alright with a slightly higher amount in these discretionary budget items, it gives myself permission to go spend that money – guilt free.
Now, what this doesn’t do is say, “Hey, you have $150 of your $200 Entertainment budget left to spend this month, you may as well buy something nice!”
I still know exactly what I’m spending my money on, and what brings me joy and happiness. Just because I have allowed myself to spend $200/month on Entertainment guilt free, doesn’t mean I have to do that each month! Coming in under that number is perfectly acceptable. But the peace of mind knowing it is there if I wanted/needed it is very relieving .
I’ve found that this method leads to much more life satisfaction and much less guilt when it comes to spending my money. Sometimes all you need is a different way of looking at things to help you on your journey!
What ways do you give yourself permission to spend money without feeling guilt? Does budgeting help you with this?