Have you ever noticed that most personal finance books and blogs are focused on tips to help people save more and spend less? It’s as if the assumption is that people are naturally spenders who need help fighting their natural inclinations — and there’s a bit of subtle shaming that comes with that tendency.
Now, there is some truth to this conventional wisdom. According to the Federal Reserve Board, 40% of Americans say they couldn’t cover a $400 emergency expense. And the Pew Charitable Trust Organization reports only 46% of Americans make more than they spend. It’s clear that there is a lack of balance between spending and saving for many Americans.
But when we only talk about saving and in the process vilify spending, we reinforce the misconception that there’s one right way to have a healthy relationship with money. Yet the most financially confident people I know are those who take a balanced approach. They focus on spending their money on the things they care about most. They make saving a priority. And they are attentive to the needs of others.
So, how do you find the right balance for you?
· Know Your Money Personality: Are you a spender, saver, giver, or acquirer? Getting to know your dominant money personality will help you become more aware of your money strengths and blind spots. Starting here gives you a strong foundation upon which to build your money balance.
Tip: Remember, no matter what anyone else may tell you, there is no “right” money personality. (Yes, even a spender personality is one to be celebrated!) Be proud of the personality you have and remember that each one comes with its own strengths and growth areas.
· Examine Your Balance Today: Take a look at your budget and see how you’re spending, saving, giving, and acquiring money. Which traits are dominant and which have some room for growth? When couples take my money compatibility assessment, I invite them through a series of questions that helps to identify their money personality and see how they are putting that personality into action in the ways they are using money. What percentage of your money are you saving, spending, and giving? How much has your income grown, and are you looking for new ways to grow it?
Tip: Don’t have a budget that you can draw on for this exercise? Take a look at your credit card and bank statements over the last month or two. Or, use my favorite tool, Mint, to help you organize your finances so you can see everything in one place. Don’t miss the unseen dollars — be sure to include anything you’re saving pre-tax through your employer in your calculation.
· Shine a Light on Your Blind Spots: Finding there is an area where you are falling short? Make it a goal to take one small step over the next month to grow that area. Could you set up an emergency fund and begin contributing $50/month? Could you be brave and ask for a raise at work if you’re being underpaid? Could you research charities that align with your values and start giving to them on a recurring basis? Could you find one way to spend this month that you feel really good about, like taking your spouse on a meaningful date or replacing your worn-out winter jacket with one that’s newer and more sustainable?
Tip: Wondering how you’ll create space in your budget for this? Look for low-hanging fruit. Is there a subscription you no longer use that you could get rid of? Could you save money on your bills? Spend a little less on groceries or eating out?
· Do a Reality Check: Most people don’t ever find their perfect balance because they are too busy living the life they think they “should have.” You know … you should have the big suburban house, two cars, two vacations every year. But have you ever stopped to ask yourself, “Is this something I can afford?” or even, “Is this something I actually want?” Just because other people have it doesn’t mean it’s right for you. Get clear on where you are at financially using my financial audit. Then decide what a balanced, fulfilling life looks like to you and begin to marry the two.
Tip: Find you’re coming up short on funding your vision? Do a ruthless edit of your finances: What are you willing to cut to gain the things that matter most? How might you bring in more money into your life? Debt is never the answer to help you bridge the gap.
· Lean Into What’s Most Important to You: Connect your values to your finances by brainstorming concrete examples of how you might save, spend, share, and acquire. For instance, if “family” is at the top of your values list, you might spend money on a zoo membership to create fun outings, save money for your children’s future education, look for more flexible (or even passive) income sources that allow you to bring money in while spending more time together, and find causes that you and your kids can support together to help children around the world.
Tip: Come back to these values during your money date nights when you check in with your budget. The conversation should not only be about whether or not you were able to make ends meet, but also whether the ways you used your money over the course of the month reflected your values.
How are you working to find balance in your finances?