Experience Your Spending
With shifting limitations, 2020 has brought clarity to essential spending and a renewed value for experiences.
A creative exercise to determine a family’s efficiency of spending is to allocate monthly expenditures into 4 categories - Needs (essentials), Seeds (savings), Wants (desires) and “What Were We Thinking?!”.
Proper ratios will vary based on financial independence goals. Regardless, it is important to treat yourself and those you love along the way. As opportunities and their impact may not be present later.
To maximize joy and spending impact consider:
Value of experiences versus things. Studies find people misjudge what purchases will make them happy, how happy they will feel and how long that happiness lasts.
Spending money on experiences creates more and longer lasting happiness than spending on material goods, which people are more prone to comparisons and buyer’s remorse. Also, objects tend to deteriorate with time, while experiences can create lasting memories and become part of your identity.
Additionally, timing of experiences is critical. Consider the family vacation to Disney, it is a different shared experience for all going when kids are 6 & 8 rather than 16 & 18.
Many small pleasures over a few big ones. Saving up for a big purchase is admirable. But in terms of your happiness, is this the best way to allocate finite resources? For many, happiness is more closely aligned to the frequency and variations as opposed to intensity.
Ask yourself if you’d be happier with a few big-ticket items, such as a luxury car, or rather indulge frequently in small purchases, such as cooking clubs, memberships, kid’s activities and spa days?
For big purchases ask, ‘What am I not thinking about?” A powerful question to socialize with friends, your spouse and trusted advisors.
For example, you want to buy a summer camp focusing on hosting, sunsets, fishing and kids playing in the lake. Overlooked is the 2 ½ hour drive, 2 bedrooms and 1 bath. This impacts friends and family staying over or creates a 5-hour drive for a day trip. Plus the camp is 70 years old, thus repairs will take your time away from family, leading to an exasperated spouse once the kids say, “I’m bored”.
For likely less money and similar ROI over a 15-year period (factoring taxes, interest, repairs, boats) you could build an outdoor space at your house and rent a camp for a week with a different family at a different location every year. You’d accomplish greater access, frequency, variances and joy of hosting friends, neighborhood kids and family.
Use money as a tool as over time you’re viewed from the sum of their experiences, not your possessions.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Glenn Brown is a Holliston resident and owner of PlanDynamic, LLC, www.PlanDynamic.com. Glenn is a Certified Financial Planner™, Chartered Retirement Planning Counselor and fee-only fiduciary helping clients take control of planning and investing, so they can balance kids, aging parents and financial independence.
This article appeared in the August editions of Holliston Local Town Pages, Ashland Local Town Pages and Natick Local Town Pages.
Please call me at (508) 834-7733 or directly schedule a meeting to learn more about considerations for planning and investing so you can balance kids, aging parents and your financial independence.
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