It’s no surprise considering that American household debt has hit a record $13.21 trillion that a great deal of personal finance advice is focused on savings. Recommendations to ditch the daily latte or make your own laundry detergent might be helpful to folks who need to implement serious austerity measures because of very high debt or those who hold an interest in extreme couponing, but for most of us, it’s just too much.
How do we understand when we should spend, and when we should save?
Personally, in my past life, working a full-time corporate job before I transitioned to being a freelancer, I spent a lot on household services, like cleaning, and my financial advisor helped me understand that it’s really a question of choices: there’s a lot of middle ground between no lunch breaks and being a jet-setter, and it’s in that middle where so many of us land. Working with a planner helped me get a better handle on where I was, and where I wanted to go.
Yet, not that many people work with finance pros. Why you ask? There are a lot of reasons. For one, money is a pretty personal thing and feels taboo, which is why we don’t talk about it very well. There’s also the perception that a financial planner will put folks on a restrictive spending plan or that you’ll be swindled. And, while there definitely are un-reputable “advisors” out there, there are also many, many finance people who take on fiduciary responsibility—that’s when it’s legally required that the adviser operates in trust, good faith, and honesty—and takes it seriously.
The thing is, while a lot of personal finance advice focuses on cutting back, and hey, it’s still a good idea to prune subscriptions you are not using, the broader picture when it comes to money has a lot of nuance.
“A healthy spending relationship is spending the money that you can afford, and if you don’t have it, don’t buy it,” said Carin Wagner, VP of Wealth Management at GHP Investment Advisors, a global advisory firm. “At the same time, just because you have the money, doesn’t mean you should spend it. Consider a name brand shirt that is 50% off but is not in your color. It’s an objectively good deal from a pure cost standpoint, but you are actually better off paying more for something that you actually want to wear.”
Famously, the bestselling author Marie Kondo has challenged consumers in a specific way to understand if their possessions “spark joy.” Whether one subscribes to Kondo’s philosophy or not, this feels aligned with broader questions about how to spend and what we spend on.
Is your coffee at the local shop actually a more positive experience than brewing it at home? Does sending laundry out afford you more meaningful time back in your day?
“For example, mortgages are fixed expenses in terms of housing, and renting costs can increase over time, but, if you have your basic needs, like shelter, covered,” Wagner said, “studies show that people get more enjoyment over time from experiences, not stuff. A couch gets worn over time, but memories of a family or friends trip will continue into perpetuity.”
Still, Millennials and Gen Z are dumping legacy financial planners, don’t have the scratch to find one, or feel that the recommendations their parents’ generation got is essentially wrong for contemporary life.
What that means for individuals who are trying to get a handle on spending, or savings, is while that there is no one size fits all, the big picture is that it’s certainly less about avocado toast or the lattes, and more about building a larger portfolio.
It still stands to save as much as you can, especially for retirement. Even if your company gives a crummy 401(k) match, still get that 3% or whatever it is. It adds up over time. If you work at a small business that does not offer a sponsored plan, open your own IRA. Stock market volatility is something you have to figure out for yourself in terms of your own tolerance, but that’s definitely a key time to consider working with a financial advisor who can help you balance the risk versus the rewards; you will likely need stock growth to fund a comfortable retirement.
That said, we all also have to live with some pleasure in the mix. Poor financial health also impacts mental health, but cutting out every non-essential is in its own way demoralizing. Wagner, above, is not suggesting that to buy nothing, only to think about it. Ultimately, it is worth being open to how financial planning can change the way we think about money.
If you are ready to get started, you can search for fee-only (meaning, they do not charge commissions) financial planners in your area, and it’s also worth asking around to trusted friends, as you might be able to get a personal referral. Feeling like you want a better handle on your finances before you take the plunge with a planner? There are many great DIY resources, like this collection of personal finance tools from Reddit’s massive personal finance community or the free Mint app. As you figure out the approach that is best for you, don’t forget to pay attention to the dynamics that exist between saving and spending and how those factors influence your own choices.