If the personal finance blog author is honest, you’ll always find two versions of financial remorse bleeding from their narratives. One type is the shame, guilt and consequence of indulging in finance irresponsibility; being counted among the multitude who have heeded the siren call of spending and accumulation of stuff. The other, more subtle regret, is turning from the call of spending to the seductive illusion of control found in over-saving.
The reality of these two spending extremes has not gone unnoticed in science. The NY Times reported on a spending study conducted on buyer’s and saver’s remorse:
Splurging on a vacation or a pair of shoes or a plasma television can produce an immediate case of buyer’s remorse, but that feeling isn’t permanent, according to Ran Kivetz of Columbia University and Anat Keinan of Harvard. In one study, these consumer psychologists asked college students how they felt about the balance of work and play on their winter breaks.
Immediately after the break, the students’ chief regrets were over not doing enough studying, working and saving money. But when they contemplated their winter break a year afterward, they were more likely to regret not having enough fun, not traveling and not spending money. And when alumni returned for their 40th reunion, they had even stronger regrets about too much work and not enough play on their collegiate breaks.
“People feel guilty about hedonism right afterwards, but as time passes the guilt dissipates,” said Dr. Kivetz, a professor of marketing at the Columbia Business School. “At some point there’s a reversal, and what builds up is this wistful feeling of missing out on life’s pleasures.”
If we were to diagnose the general population, I’d wager that spendthrifts vastly outnumber cash hoarders (Shopaholics Anonymous estimates 25 million American shopaholics). There’s also a fine line between resisting the urge of a spending relapse and reasonable spending. It’s a confusing nuance that confounds us, promoting frustration and guilt.
While I’m no expert, I too have been a victim of my own cash hoarding ways. I’ve developed a pair of tests to help me figure out when I’m taking frugality too far?
The Relationship Test
Unhealthy and irrational decision-making leads to strains in your personal relationships. If making a “frugal” decision could negatively impact a relationship, you need to stop and think carefully about what you are doing.
The Prudent Patron candidly shared her reservations about skipping a Duran Duran concert with a friend:
One of my dear friends begged me to go with her to see it. I’m sure it would have been a very fun girls night, but the cost of tickets were more than I wanted to pay, so I skipped it. It is one of those cheap moments I regret.
My friend wanted to go so badly that she went alone…oh the guilt. I bet we would have had a great time reminiscing our youth through 80′s tunes.
Sometimes our relationships are spending enablers and we need to be wary of them. Like when your group of friends do nothing but sip away their paychecks at the bar every weekend. We are always justified in refusing our children overpriced, designer t-shirt purchases no matter the perceived level of misery threatened by our offspring. But, it’s not hard to realize when we’ve passed up a rare and much deserved opportunity to use our money in a way that invests in a friendship or marriage.
If you find it hard to open your wallet to invest in a relationship, you need to think about how much you value that relationship. If it is an important relationship, you are foolish not to invest in it! Believe me, you will earn dividends.
The Spending/Savings Friendship Test
Budgeting, goals and planning aren’t just good strategies for defeating the desire to over-spend. These tools can also indicate when you are cash hoarding.
Let’s say you budgeted $100 for entertainment, but only spent $80. There are many possible reasons for celebration. Perhaps you over-budgeted and don’t really need $100; now you can lower your budget. Maybe, you want to save the extra $20 for a more lavish outing later. The savings gods may have blessed you with a special deal like free tickets. But, make sure you thoughtfully consider why you broke your plans?
A budget shouldn’t be like a football competition where the spending team squares off against the savings team and you are quarterbacking the savings team (although it often feels that way). Spending is important and natural. Without spending you would be dead.
Instead, spending and savings should be like a quirky three-way friendship. If you are spending too much time with just one of them, you need to answer for your neglect. Never spending your dream vacation savings on your dream vacation would be an indication that you are getting too cozy with your friend saving.
Approach your planning with these tests in mind and accept the idea that budgeting is as much about spending what you plan on spending as it is saving what you plan on saving.