289 | Permission to Spend

There seems to be a collective view in society that not spending money is somehow better than spending money, but I believe there’s a balance.

Underspending is just as harmful as overspending.

In this episode, let’s talk about the balance between underspending and overspending and the importance of making room to spend on things you enjoy.

• • my experience of buying a new couch and thinking we shouldn’t be buying it
  • how the thought that we shouldn’t be spending money has popped up for me throughout our money journey
  • my clients’ experiences with thinking they shouldn’t be spending
  • the balance between underspending and overspending
  • how to make room for spending on things you enjoy
  • how fun money accounts transform your finances
  • the problems that arise from not spending money

• Need help with your finances? Schedule a consultation here

You’re listening to Personal Finance for Lawyers. I’m Rho Thomas, and as a busy wife, mom, and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back.

Today, we are talking about making space for spending on things you enjoy.

So my husband and I just bought a couch, and it’s one that I’ve been eyeing for a while. Like we’ve had our couches for 10 years now, at least, and it’s time to get a new one.

But there was still this piece of me that was like, oh, maybe we shouldn’t get this. Maybe we shouldn’t spend this. And it’s something that has popped up since the very beginning of our financial journey.

Way back in 2016, when we looked at all of our debt and looked at all of our finances and savings and saw exactly where we were, saw how much debt we had, that our net worth was negative 6 figures, all of that, we decided that we were going to put ourselves in a better position.

But I remember having these moments where I’m looking at how much we’re spending and I’m thinking, we should cut this, we should find a way to save on that. And it really wasn’t that we were spending too much. The spending was reasonable, but it was this thought in my mind about how we shouldn’t be spending as much as we were because we had this debt or we weren’t where we wanted to be financially.

And this is something that I see a lot with my clients as they’re getting into their financial journeys and they’re paying off debt and they’re saving and they’re looking at their finances more intentionally, it’s almost like this switch that flips, that says that anything that you’re spending is bad because this money should be going towards more responsible things, “responsible things.”

What if that’s not true? What if underspending is just as bad as overspending? So we talk a lot about overspending and how that’s bad, and you don’t want to do that, but what if not spending at all is also bad?

It’s like these two ends of the spectrum, right? Overspending, spending on all the things, going out to eat, shopping, lifestyle things, and not putting money towards your goals like paying off debt and saving and building your investments. But then on the other side, there’s the not spending on anything and trying to put all of the money towards paying off debt and saving and building your investments.

And I think that both of those are harmful. I think on the overspending side, it’s harmful because you’re not able to put yourself in a position of financial security. But on the underspending side, you are not able to enjoy the fruits of your labor. And this is something that I have had to work at over the years.

I mentioned when we first started with our debt journey and trying to pay everything off, thinking that we should be cutting and we should be doing this and we should be doing that, but even as we move further along, five, six years later, we paid off our student loans, and my immediate thought was, we should put that money in investments. And my husband has a similar brain, right? He’s thinking that we should be doing something responsible as well. And we caught ourselves.

And we’re like, we have sacrificed over this last five, six years to pay all of this off and to put ourselves in this position. What if we allow ourselves to spend some of it? Now, we’re not going all the way to the other side, and now everything that we were putting towards paying down the debt is now going towards spending. But what if we loosen the reins a little bit and allow ourselves to enjoy it? And that’s what we’ve done. And it’s been wonderful.

And so now it’s popping up again with buying this couch where I’m like, oh, I don’t know, maybe we shouldn’t spend this kind of money. The couches are fine. They still held, you know, they’ve held up well, they’re still okay. They’re not, they’re not okay. And so we went ahead and bought the couches. But the key is something that I’ve talked about on here before and something that I talk about with my clients all the time. It’s being intentional.

So we didn’t just on a whim decide to buy a couch. My husband got a bonus and we decided to use some of that bonus to buy a new couch because we’ve had our couches for like 10 or 15 years now. And so getting a new couch was something that we planned and we know that it fits within our financial plan.

That’s what I want you to do as well. You might be in a position where you’re overspending, and you’re living paycheck to paycheck or your account is getting down to $100, a couple hundred dollars, or it’s getting down to the negative, or that kind of thing.

As you are working on changing those habits, as you’re working on paying off debt, as you’re working on increasing the amount of money that you have left at the end of the month and building your savings, I want you to also think about how you can still spend on things that you enjoy – how you can still make room for those things that are important to you, even as you turn things around financially.

And again, it comes back to being intentional. So one of the things that I talk to my clients about is what is important to them.

We talk about the things that they value, the things that bring them joy, and we make sure that we make room for those things in their plans. The thing is, a lot of times we’re spending a lot of money on things that we don’t actually care about. And when we look at it and we see where this money is actually going, we can decide to keep the money that’s going towards these things that are important to us while cutting the things that aren’t as important. And that frees up some of that cash flow that you can use toward your goals and things like that.

The other piece of that is I always teach my clients to open a fun money account. This is something that my husband and I started back when we put our money together and we were having some tension in our marriage over how we were spending the money.

This was even before our financial journey. It wasn’t like this intentional thing, like, oh, I have this bright idea of how we can manage our finances better. This was, let’s stop all of this tension and fighting and stuff in our marriage.

So we each had individual bank accounts from before we put our finances together, and we decided that we would each get a set amount of money each month that we could spend, no questions asked. So that line item that goes in our plan each month, that he gets this amount of money, I get this amount of money, and it goes into those individual bank accounts so that we can spend on those things that the other person maybe doesn’t value in the same way, and it’s not making any impact on our family finances.

And so I teach my clients to do the same where they’ve got a separate account that’s just for that fun spending. And that way they know that they’ve got this pot of money that they can spend on things that are important to them or that are fun to them that maybe don’t feel responsible, but they know that they’ve made room for it in their plan and that they can spend on those things without impacting the rest of their finances and their goals and things like that.

So when you’re thinking about your finances and how you’re going to improve them and getting out of debt and building your savings and investing and all of that kind of stuff, I want you to also make sure that you make room for spending on things that are just fun for you, that don’t necessarily fit in that responsible category, but that brings some sort of joy to your life.

For me, it started with having that fun money account that my husband and I set aside for ourselves and that allowed me to spend just for the sake of spending. It wasn’t because we had to pay this bill or because we needed this thing or because we were paying on debt or whatever. It was this thing that I want to buy that I just want to buy and I have money set aside to buy it.

That has been helpful for me and it’s been helpful for a lot of my clients as well.

And again, it comes down to that intentionality piece, being intentional about how you’re spending, making sure that you are thinking about the things that are actually important to you and using your money for those things and not just spending on everything.

But the main point of this episode is I want us to think about not spending similar to the way that we think about overspending, where it’s not that just not spending money is somehow nobler is better, because I’ve seen people where they just try to not spend money and just sit in the house and do nothing. And then often it’s an overcorrection where they go out and they’re splurging and binging, shopping and all of that because they’ve deprived themselves for so long.

So I want you to have balance. Yes, we’re using money for financial security, for building a safety net, for paying down debt, but you also get to use your money to live your life and to have fun. And that’s not a bad thing. You just want to be intentional about how you do it.

So that is it for this week’s episode. I hope that it has been helpful for you. If you need any help with managing your finances, please reach out to me at rhothomas.com/call. Schedule a consultation and we can talk about how we can work together.

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As we close out, friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to take back control of your time, build wealth, and live the life of freedom and choice you deserve.

Talk to you later.