A Lifetime of Savings Means You Can’t Bring Yourself to Spending
Imagine the following: You’ve 67 years old. Over the past four decades of working, you’ve amassed a net worth of well over several million dollars. This is more than five times the national median of $200,000 for someone who is 65+ years old.
But there’s a problem that’s been hiding beneath the surface for the past several decades that’s so subtle even you can’t see it:
You can no longer bring yourself to spend money.
How can this even happen in the first place? In one word: Habits.
Everyone has habits. For one person, that habit is spending money as fast as she earns it. For another, it’s saving and investing. Most financial advisers tell you to cut spending and increase savings. What they don’t do is teach you how to spend that money wisely. There’s a very small minority who can walk the middle line.
When you spent a lifetime just earning and saving, it becomes very hard to spend that money. You check your net worth with an aggregate tool like Personal Capital every day. You notice the price of groceries and gas going up. Rather than making multiple trips in the car, you plan trips so that you do all your chores at one time. You look for the best deals when shopping, saving a dollar here and there if you can.
At home during the winter time, you set the thermostat to 63 F when most people set it to 70 F. In the summer time, when it gets up to 100 F you run the fan for as long as you can even though you have A/C, using it only when you cannot stand the heat anymore.
You can see where I’m going with this. When all you ever do is figure out how to save every dollar, it becomes harder and harder to spend a dollar.
At this point, you’re probably thinking, “Well, that’ll never happen to me!”
It Happened to Me
This happened to me several years into my financial freedom journey. I was saving roughly 30% of what I brought home every month. In just one short year, I’ve achieved my first (and constantly evolving) definition of financial freedom: I had enough Go to Hell Money saved up for a rainy day.
Go to Hell money is a cash reserve that empowers you to tell your employer to “go to hell” then quit at any given moment because you’re not longer living from paycheck to paycheck. It’s also a cash reserve that you fall back on in case you lose your job. Most people live from paycheck to paycheck. All it takes is something as mundane as having to pay for an unexpected car repair to turn everything upside down.
Yet, when it came time to spending money on things which would bring me joy and happiness, I had troubles doing so. I would spend weeks agonizing over a purchase that was $20. If something was $100, it would be months before I finally made a decision, usually with me not buying that thing I wanted in the first place. I was making myself, including everyone else around me miserable. I didn’t even know I was doing this.
I might be rich on paper, but spiritually I was dead broke.
You see, without knowing it, I had become my father. I had become Ebeneezer Scrooge.
Without know it, I’ve turned the energy of money against me.
Money’s Purpose
Money serves several purposes:
- Enables us to live comfortably.
- Multiplies the good we can do for others.
- Shortens the time it takes to accomplish that good.
Yet, I wasn’t living comfortably or doing good for others. I had become Charles Dicken’s miser, Ebeneezer Scrooge. As a kid, I always thought A Christmas Carol was more of a cautionary tale of what happens to a person when he or she isn’t generous and the path of destruction and misery he can bring to others around him through that greed. There’s also a subtext laying below the surface that Dickens was only too familiar with: We can unconsciously freeze the energy of money so that it no longer brings us good, the reason for wanting it the first place. In fact, this energy can destroy us, as it had with Scrooge.
Saving Too Much
At this point, you’re probably wondering if I’m saying there’s such a thing as saving too much.
Yes, that’s exactly what I’m saying.
In my 30 Days to Financial Freedom audio program, I suggest you allocate the following to your household budget:
- 50% or less towards necessities
- 20% or less is saved and invested
- 30% goes towards other discretionary spending
But as you have learned by now, there’s more to the energy of money than just saving and investing every dollar. There’s also the spending aspect of it, which helps free yourself from money energy blocks that you from living a fulfilling and happy life.
To break yourself out of the Scrooge mindset of contraction and greed, there’s something you can do with the other 50% not allocated towards necessities:
- 25% investments
- 10% play
- 5% give
- 10% education
The two categories I want to expand on are play and give, for these two categories contain the key to breaking out of your Scrooge mindset. You will once again allow money to help you live comfortably and amplify the good you can do for other people.
Tithing
I’ll be honest. I used to think giving was pretty stupid. After all, why would I want to give away my own hard-earned money for people who didn’t want to work hard for it. After all, we live in a society of entitlements and free handouts.
If you asked who my favorite charity was, I’d say I am my own favorite charity.
Yet, there was a theme to Master Thinkers and Paradigm Shifters, like Bob Proctor and Mary Morrisey: They often gave. They often said that the more they gave, the more that comes back to them. And they teach you in their workshops just how powerful it is to give. I’m talking about organizations which help build schools in Africa and empower the people there by elevating them from ignorance through education. I’m not talking about giving money to the guy at the offramp of a freeway, who realized a long time ago he doesn’t have to work another day in his life so long as he takes advantage of people’s sympathies. Or people who vote for social programs and new taxes, thinking it’s only fair that the wealthy give their wealth back to the everyone.
It’s the giving part that confused me. How can you get back more than you give? Wouldn’t it be better to just keep what you have? That way, you have even more?
This is where the energy of money comes into play. By giving, you are freeing up the contractional forces of you have built around money during those years of hoarding, saving, and investing. After all, you can’t take it with you when you die.
It may seem that money makes the world go round and round. Remember underneath it all, money is just a game. It’s a convenient indicator of our success in the relationships we have built with other people. Businesses exist to help people solve problems. In fact, 80% of a business’s revenue comes from 20% of its repeat customers.
Yet, it’s hard to part with your hard-earned money, especially when you’ve never given before.
The first thing in your paradigm-shift is realizing that money isn’t “hard-earned”. The paper money is really just an idea. If you really think about it, it has not extrinsic value. It’s only worth something because the government which printed it says it is. It’s not different than the worth of food and clothing.
The second thing is in realizing that money is circuitous in nature. It’s called currency because it circulates. As that old cliche goes, money makes the world go round and round. In order for money to work, we put it into circulation. Money helps humankind accomplish something more important, and that is to help create betterment in people’s lives. By circulating value and worth, things get better for everyone.
There’s been numerous studies showing that volunteers who work for free often do a better job than those who are paid. This powerful example shows that people do not ultimately work for money. They work to serve and help other people.
I suggest finding charities or organizations which matter to you and do not fight. That means avoiding political organizations or organizations with political agendas. While politics come into play in almost anything and everything we do, you can still find organizations and movements out there that have a minimal of politics and agendas. The reasoning behind avoiding these types of organizations is you’re giving money to fight or resist something, which is never a good thing.
The more you fight and resist something, the more of that same thing you get. You’re only working against yourself as you build up more walls and defenses to avoid experiencing more pain. That puts you in a defensive stance, which means you cannot grow.
By giving your money, you’re learning to part with that $20 or $100 that would have otherwise caused you mental anguish. Doing this also helps make it that much easier to spend money later on. Of course, we ultimately do things in the service of others. What better way than to make more money so that we can continue to serve others?
Play Money
The idea behind play money is simple. Every month, you must spend at least 10% of your income on play. This could be things like entertainment, a trip out of town, a meal you wouldn’t have normally treated yourself to, some gadget or toy, or an event. The catch is you have to spend this percentage of your income every month.
The idea here is pretty much the same. Money is circulatory in nature. Spending in this context reminds us the constant why for saving and investing in the first place. Money brings comfort and joy into your life. It amplifies the good we can do in this world and the time we do it in. Why are you (and I) waiting until some magical milestone in retirement to spend it?
If we wait forty years into the future, by that time our mindsets and behaviors are so inset in stone, we become Ebeneezer Scrooges. We can no longer spend that money, instead hoarding it.
For everyone, the phrase “financial freedom” can mean a number of things. If you ask one person, she will say it means being able to take a vacation every year without worrying from where the money will come. If you ask another person, he will say it means being able to take a loved one to Disneyland for their 50th year anniversary.
Early on, my definition of financial freedom means having “Go to Hell Money”. This is money that can help me live for six months to a year in the event of a job loss. This is money that helps pay for an unexpected car repair or other emergency without having to take a loan out. In fact, did you know that 60% of Americans have less than $500 saved up in the bank?
Now, it has evolved to being able to make decisions where money is no longer a primary consideration.
I’m still donating to my favorite charities. What I’m not too good at is spending at least 10% of my income every month on play. It’s more difficult, especially when you’re older and are not in need or want of much of anything. If that’s where you are, that’s fine, too. Then you may want to drop this percentage to 5% and raise the give to 10%. In other words, the categories are flexible.
You can also save up the play money from this month until next month (or the month following) especially if you want to get a big-ticket item.
In the end, the idea is simple. You are are building a healthy energy around money. After all, it would really suck to be in your sixties, after decades of savings and investing, and not be able to spend a dime because those habits have become so ingrained.