Like wealth, enjoyment can mean different things to different people. You might find enjoyment in many aspects of life, from simple pleasures like long walks and get-togethers with friends and family, to larger events such as vacations or major life celebrations.
For some, a common form of enjoyment is spending. But how do you know if you’re spending too much? Here are some common characteristics that may prove insightful or inspire you to refocus on gaining or reclaiming your financial security.
1) You Frequently Treat Yourself Because You’re Working Hard
This is one of the most common responses we receive when evaluating spending increases with our clients. Hard work is certainly deserving of rewards. However, the key is to strike a balance between immediate enjoyment and longer-term payoffs, such as securing your retirement objectives.
People are often surprised by how much extra they should save as their compensation increases, especially as Social Security doesn’t replace higher earnings. Here’s a quick and easy look at what you need to save for retirement, relative to your age and earnings.
2) You Convince Yourself You Can Earn It Back
Another common justification for spending is telling yourself that you can easily earn enough to replenish splurges. The reality is, however, that even if you can earn it back, you’ve missed a saving opportunity. If you make this statement in the future, take a minute and ask yourself how frequently you earn it, and how frequently you save it.
3) Shopping Is One of Your Favorite Activities
Everyone has favorite ways to pass the time, but if one of your favorites is shopping (in-store, online, through catalogs, or elsewhere), this could indicate you’re a spendaholic. There are plenty of free and low-cost activities that can be just as enjoyable, supporting your long-term financial success – and ensuring a less cluttered home to boot!
4) Your Holiday Spending Adds Up
Appreciating the special people in your life should be a year-round effort. If you blow the budget at holiday time, then spend the New Year paying off credit card bills, you’re probably over-spending. Take the time to think about appropriate gifts and budget limits, set realistic expectations with gift recipients (especially children), then shop smart. Don’t forget to budget for additional holiday costs too, like travel, food, and decor.
5) Purchases of $100 or More Seem Trivial
If you’re spending too much, you may have grown accustomed to larger ticket items. It’s dangerous when spending becomes trivial. If you no longer blink an eye at spending amounts of $100, $1,000, or more, it’s time to take a long, hard look at your purchasing habits. Pick a dollar threshold, beyond which you should pause before paying, and ask yourself the following:
- Do I really need this?
- Does this purchase align with my long-term financial goals?
- Am I sufficiently on track financially that I can afford this?
6) You’ve Redecorated or Remodeled More Than Twice in 10 Years
Adequate maintenance and repairs help safeguard your real estate investment. However, frequent elective home improvements can be another telltale sign of overspending, oftentimes with sizeable price tags. Consider the potential benefits of putting that money to better use e.g., paying down your mortgage or HELOC balances, or by adding it to your retirement nest-egg.
7) You Spend More on Vacations Than You Save
There’s no doubt that vacations are important for your physical and mental wellbeing. However, if the amount you spend on vacations exceeds the amount you save for retirement, you might only be addressing your short-term well-being. Use our tips to save money on amazing vacations, and divert those dollars to support your longer-term wealth and happiness.
8) You Seldom Say No
One of the biggest challenges you may face, especially if you’re prone to overspending, is saying no – to yourself, to your partner, your kids, friends, and others. Saying yes is the right choice in some situations, but saying no can sometimes be just as responsible, both for yourself and those you love.
9) Your Credit Cards Are Your Back-Up Plan
Perhaps the most troubling indicator that you might be an over-spender is if your credit cards are your financial back-up plan for large or unforeseen expenses. If you don’t have an emergency fund, let alone meaningful savings, you’re almost certainly spending too much.
10) You Get Scared Thinking About Retirement
If the thought of planning for retirement, including learning how prepared (or unprepared) you are, scares you, it’s time to stop procrastinating! Take control of your life and your spending, and talk to your financial advisor about how to set and achieve meaningful and attainable financial goals that will support both your current lifestyle and your future life objectives.
SageVest Wealth Management’s ongoing financial planning and wealth management services can help you quickly and easily identify spending levels and whether they’re reasonable, relative to your income, assets, and long-term wealth objectives. Please contact us to discuss approaches to balancing your every-day life goals and wise financial decision-making.
