Spending Guilt
& how to lose it in 2021
:::Issue #3. Why are you receiving this? You want to be in a good place. This is where I share educational content and practical tips on personal finance, so you can get to your good place, wherever that maybe:::
👋🏼 Hello wealth builders!
Welcome to the third issue of the hellogoodplace newsletter.
The holidays seem far behind us already, and we are fully into personal annual review and goal setting season. I personally did a good amount of this already in December, but I always find it motivating to do it again at the beginning of the year. If you need a little bit of guidance on doing an annual review, I recommend joining The Annual Review Workshop 2021 led by Tiago Forte and David Perell that runs this weekend, Jan 9 - 10.
What I’ve been up to:
I spent some time in December formalizing my Instagram page and posting on a more regular basis (one post a day). It was a great example of learning by doing, where taking action led me to learn what I like, and don’t like, and come to a format that I feel comfortable with - all in about 2 - 3 week period.
Speaking of learning by doing, I posted a couple of videos for Plancorp in December with Peter Lazaroff, our Chief Investment Officer. A recording of these videos can be found under my Instagram IGTV. It was way easier than posting my Money Monday Youtube videos because it required little to no editing. A couple of lessons learned here:
I’ve gotten better at editing videos!
The Money Monday videos don’t require so much editing.
I’m hoping the two lessons will help me post videos more consistently in 2021. It’s amazing how much progress you can make in a short period of time by just doing it.
Spending Guilt
One of the most frequent things I heard from both friends and clients in recent months was that they feel guilty about spending money.
For example, one couple was embarrassed that they recently bought a new car, while another sheepishly told me they indulged in an expensive outing. The thing is, their income and savings was more than enough to warrant their spending.
The underlying problem with their spending was not their income, but because they feel like they should be saving more. In other words, the guilt is a result of a lack of clarity on where their money is going.
One of the best ways to remove the feeling of guilt is to create a budget. A budget is synonymous with the need to cut spending, but that isn’t always the case. The other half of budgeting is that it provides clarity into where your money is going, and the freedom to provide yourself with an allowance that you can spend on whatever you want - without the guilt.
This is what I do: I have a budget such that every dollar of income is allocated to a goal, but try to keep it as simple as possible. My retirement goal contributions, emergency goal (I’ve decided to increase it a bit in 2021), and various other goals (future vacation goals, 2021 holiday budget goal, charitable contribution goals) are all automated.
The rest of the money is split into two ways:
An automatic contribution to my taxable investment account as a general wealth building goal
Money I can spend
The money I can spend is my “allowance” to use, however I want. I use it for rent, groceries, restaurants, etc. Knowing that I’ve allocated my income to fund important financial goals already releases me from feeling guilty about how I spend my allowance.
Putting together a budget and a financial plan helps you understand how your income needs to be allocated to fund your financial goals. We often forget that our current lifestyle should also be a financial goal. If your income falls short of funding all of your future and present goals, you can prioritize and adjust as necessary, but until you do this, you will continue to feel guilty about how much you spend today.
As we close our minds to 2020 and look forward to 2021, now is the perfect time to create your budget. Liberate yourself from spending guilt by putting together a budget and build your financial plan.
To being in a good place,
Daniel