When people come to me to get financial advice, they can be surprised when I tell them to spend their money instead of saving or investing it. Maybe they are expecting to be sold some product instead of getting honest financial advice? But having money is only ever good if you have something to spend it on. Having money in an account will never bring you true joy but spending it on something meaningful will. It is about making good use of your money and not wasting it on stuff that means nothing.
You may find yourself in a situation where you come into money unexpectedly, usually through an inheritance. People tend to get all serious about this money and want to put it to good use; paying off the mortgage, maxing out their pension contributions etc. There is nothing wrong with taking a portion of this money and enjoying it. Go on a nice holiday, do up the house. Even spend some of it on new clothes, gadgets etc, whatever you enjoy doing. The person who left you the money wanted you to enjoy the money and put it to good use.
There are going to be big events in your life that you need to spend and not save. Buying your new home and furnishing it for example. What is better, seeing a number going up and down in value on a screen or going to a furniture shop and picking out a real comfy sofa that you can relax on in the evenings in your new home?
If you are saving for a mortgage, there’s no harm in reducing your pension contributions for a few months and saving the money instead for 6 months so you can show the bank how much you save each month. You can just increase the pension contributions once you’ve got your mortgage (and don’t put it off or you’ll never increase it back!).
There is no harm in spending money on things that gives you enjoyment in life? I am not talking about accumulating stuff, which provides a fleeting enjoyment. What experiences do you want to enjoy? For example, I like to travel with my wife and family. As well as out summer family holiday, my wife and are walking The Camino Way over 5 years (this is a pretty inexpensive holiday) and we go on weekend breaks together and with the kids a few times during the year. We decided that this is important to us and we would prefer to spend money on seeing places rather than on other things.
After decades of working and saving, you have retired from work. You are now in the decumulation stage of life when it is time to spend that money. A lot of people find this difficult to do and hold back with their spending out of fear that they will run out of money. Going through the financial planning process and keeping it up to date will give you a good idea of how much you can afford to spend each year.
Another issue I see with retirees is them wanting to leave money to their “kids”. These kids will probably be in their 50’s or 60’s when they receive their inheritance, so they should have their own savings and pensions by that stage anyway. Spend it and enjoy it. If there’s anything left at the end, give it to your kids. There’s probably a house there for inheritance anyway.
The important thing when you are spending money is that you can afford it. If you enjoy an extravagant lifestyle but can’t afford it, you’re asking for trouble. You can still enjoy life and save money for the future as long as your expenditure is in line with your income.
What would you like to spend your money on and when? What do you need to do so you can make it all happen? Let me know by dropping me an email at steven@bluewaterfp.ie