Avoiding regret from deliberate spending
People often have buyers regrets after many of their purchases. Spending money is a good thing, but in order to avoid the regret we must use intentional spending.
Today’s classic is being republished by The doctor philosopher. You can see the original Here.
Editor’s note: If you’re interested in learning more about how to create a cash flow plan that will help you purposely spend money while paying off debt and investing for your future, be sure to check out the Medical Degree To Financially Free – The 5 Week Course where everything is taught for you. Click here to learn more about Medical Degree to Financially Free.
Your relationship with money can either promote prosperity and wellbeing or worsen your already smoldering burnout. Our relationship with money can be complicated! We were all there. You make a big purchase for a home, car, new clothes, or designer gadgets … only to see buyers regret soon after.
Maybe we should just avoid spending money on something that is not essential. That would solve the buyer’s remorse problem, wouldn’t it?
One of the differences about The Physician Philosopher – compared to many other personal finance websites – is that I like to remind people that it’s okay to spend money. While saving is important, we must also make the heart happy.
Unfortunately, wrong spending can often lead to repentance among buyers. But it doesn’t have to cause pain!
While meeting our overall financial goals is important, it is also important to remember why you set out: gaining financial freedom so that we can prevent / escape burnout and create a life of satisfaction. I’m here to tell you that by spending deliberately you can avoid consumer regrets.
What are Intentional Issues?
The answer to buyers’ regrets is to use intentional spending.
The idea behind intentional spending is to realize that budgeting / tracking spending is vital to your financial success, but it is also important to let go from time to time.
As long as we use a backward budget to make sure we meet our overall financial goals, we can spend the rest as we see fit.
However, failure to spend our time and money with clear goals and intentions can still lead to repentance from buyers. The reason we have to purposely spend is that we are not very good at letting go.
There are a lot of studies that show that Americans are really bad at letting go. Americans miss billions of vacation days every year. Apparently, even when we are on vacation, we are not very good at it. It often makes us less happy when we return from vacation than when we leave.
The reason? A Harvard study seems to believe that this is because we plan badly when we go on vacation and that the stress of travel (when badly planned) makes up for any happiness we would expect from the trip.
Interestingly, there is also good research that indicates how far we commute to work, which also affects our life satisfaction! How much and how well we travel apparently has a profound influence on our joie de vivre.
Since we are not good at letting go ad libit, it means that we have to be very deliberate in letting go. Don’t forget that the vacation analogy extends even further. We discussed that a badly planned vacation with a lot of travel stress actually hurts you. Likewise, spending money that you don’t have and that is not on your budget will add to your stress levels!
If it is causing you to go into debt, fund / take advantage of a purchase, or prevent you from saving adequately, it’s probably not worth it! These are not intentional expenses.
Deliberate expenses make your head and heart happy! If it doesn’t do both, it is not an intentional expense.
Steps to Deliberate Spending
Here are four steps you can take to make deliberate expenses in your life!
Step 1. Backward budgeting
Part of avoiding buyer remorse from intentional spending is budgeting. Don’t worry … I hate zero dollar budgeting where every dollar has a “job”. I will not encourage you to do so unless absolutely necessary.
Why? Because I don’t. This is why I use Cash Flow Planning and Backward Budgeting, both of which I teach in my Medical Degree to Financially Free course.
However, this does not give you a free hand to spend money without thinking about where it is coming from or what the effects are. Make sure you have the money to spend and that it doesn’t affect your ability to aggressively save or destroy debt!
Are you still achieving your budget targets? First check this box. This is Step 1, 2, and 3 of the Intentional Expenditure. Use products like mint or personal capital to see where your money is going right now.
Then set up a backward budget to meet the overall goals. This type of budget encourages you to (1) define your overall financial goals, (2) pay your future self first, (3) automate your financial goals, and then (4) spend wastefully on the remaining money!
What you have left is the money that you may want to spend without judgment because you already attended to your financial goals first!
Step 2. Take a minute to think about it
While we can consult the research on what makes people happy, it is also important for us to spend time thinking about the subject for ourselves.
Most happiness economics studies find that people generate more satisfaction from experiences than from things.
This can mean skiing in the mountains, spending a long weekend on the beach, or going to a big city you’ve never seen before. As mentioned above, however, it should be well planned and travel stress kept to a minimum!
We can also prevent buyers’ remorse and have the financial pleasure of spending money on other people, buying smaller items more frequently, and delaying large purchases.
Step 3. Research money spent on stuff
If you really want to avoid buyers’ remorse, be aware of the things that have caused you this pain in the past!
First, take an inventory of everything in your home and garage. Think how happy you were at the time of purchase. Then think about how happy it makes you now. You may even regret the consumers. The reason for this is often that we made a purchase with little thought.
If you don’t spend money on experiences and choose to spend money on things, take some time.
Indeed, if the cost is significant, I recommend that you support the one month rule. So you have time to research. Find the best product at the best price.
For example, when my wife and I needed a new mattress, we did our research. Apparently mattresses are bought cheapest in May. Who knew? So we waited until then to buy. After all, there are very few “mattress emergencies” that urgently require you to buy one now!
What constitutes a “big purchase” will be different for each person, but whatever that number is, spend some time researching big purchases. You may find during the process that you would regret it later.
Step 4. Apply the 10% rule
It is important to keep our expenses in check, especially when we receive large amounts of money. When we receive a bonus, raise, or windfall; This is the perfect time to apply the 10% rule.
The 10% rule applies when you receive a raise, promotion, bonus or other unexpected money. After looking at your after-tax take-away payment, take 10% of the money received and spend it on whatever your heart desires (after thinking about steps 1-3 above).
Spend that 10% with no judgment or remorse from buyers. How is that possible? Because you smash your financial goals with the other 90%!
See, the 90% goes straight towards your Wealth Accumulation Rate (WAR). Use it to pay off your debts or to invest for your savings goals including financial independence, investing for your kids’ college, or any other goal you might have!
Following this rule enabled my family and I to repay $ 200,000 in student loans in 19 months and increase our net worth by $ 250,000 in one year.
Take-Home: Buyer’s remorse
The purpose of the intentional spending philosophy is to remind you of one thing. As long as you meet your financial goals, spending money is perfectly acceptable! Budgeting and personal finances can get so restrictive that they can affect your marriage and possibly even your sanity.
Just like you deserve (and need) to have that well-planned vacation to relieve stress, create job satisfaction and increase motivation at work. You have to do some deliberate spending!
What do you think? Are you spending it on purpose? Are you spending too much Are you straining your budget? Do you need a break? Leave a comment. I want to hear your intentional spending stories!