Clouds Ahead: Spending is not the problem... Spending on the wrong things is

By Gary Silverman, CFP®

We’re in a series about truths that are not fun but need to be known and, in many cases, acted upon. Or as I’ve said every week, I’m whacking you upside the head to get your attention. Today we tackle spending. It may seem harsh, but sometimes the truth hurts (I think that’s a saying somewhere). Here goes.

• Life is not fair. Just because someone else can afford something does not mean you can. If you can’t afford it, you shouldn’t buy it.
• Many things you buy continue to take your money: Cars, houses, boats, and swimming pools. They have expenses like fuel, fluctuating taxes, insurance and maintenance. Not considering the ongoing expenses before making a purchase is dumb.
• Only items that will appreciate in value are an investment. No matter how much you “need” a vacation, it is not an investment. Your car is not an investment. Oftentimes a house is not an investment for you…but may end up so for your kids. This does not mean they are bad things to spend your money on; I just don’t want you to be duped by salespeople who help you justify something you cannot afford by calling it an investment.
• Having a lot of money doesn’t mean someone is evil or has some special connection. In the same breath, not having much money doesn’t mean someone is lazy or stupid.
• Every religion I know, and most philosophies, encourage charity. So should you.
• Money is a tool, not a goal. Saying “I want more money” misses the point if it is not connected to a goal. Saying “I want a 9/16” wrench” misses the point. Saying “I need the wrench to tighten that bolt” connects the tool to the goal.
• Budgeting is about making choices. For most of us, we are limited in how much we can buy. That means every time we buy something, we’ve also made a choice of what we will not buy.
• Buying something just because you like it is not wrong. Buying something just because you like it, even when you can’t afford it, is wrong.
• If you don’t pay off your credit cards every month, you have a spending problem.
• Saying you can afford that new [fill in the blank] which is not a need, when you don’t have funds to afford house repairs, or the next car, or saving for retirement (all needs), means that you are lying to yourself.
• If you don’t know if you are spending wisely, you need a budget. If your savings are dwindling (or non-existent), you need a budget. If you don’t have the ability to cover those needs mentioned in the last bullet point, you need a budget.
• Budgets are not fun, but neither is a tooth filling. But when you need one, you need one.

Spending is fun, but spending wisely is healthy. Doing it the right way might mean you don’t get what you want right now, but it helps eliminate much of the stress associated with finances.

Come back next week and we’ll look at the problem of presumptions.

May God protect the innocents in Ukraine.