How many times in your life have you been forced to confront your approach to money? For the spenders it often comes after a period of excessive spending, which is often followed by a period of extreme cost-cutting and debt repayment.
Many people have a love hate relationship with their personal finances, jumping from one extreme to another. Moving from a complete lack of reasoning and understanding of consequences, to hoarding every penny. The obsessive spender transforms into the obsessive saver.
Obsessive financial behaviour has its benefits
If obsession is what leads to a ‘financial correction’, a little obsession can be a good thing… It can drive a person to mercilessly track every dollar of income and expenditure, turning their desperate financial situation into a healthy bank balance.
For individuals that see very little – if any – net income at the end of each month, this approach is highly recommended.
Taking this obsession too far can be detrimental. The passion to move your finances in the right direction can quickly become the only focus, creating an unhealthy financial approach that can negatively affect you and flow on to those around you.
The problem with extremes is they’re too absolute – “I could get hit by a truck tomorrow” is no basis for a budget (personal insurances on the other hand) and neither is a mindset of extreme frugality.
If you feel you are an extreme saver it is important to remember your value is not defined by your net worth. For the extreme spenders, there are advantages to growing your bank balance, and that is having the means and confidence to spend without the guilt of cost-cutting consequences.
In truth, the only purpose money holds for you, is what you can do with it – Money has no intrinsic meaning…
Extreme savers have an edge over extreme spenders.
Financial goals! That’s not to say the extreme spender doesn’t have goals, it’s just that their personal goals have not been pegged to a financial goal e.g. rather than saving for a holiday, it would be funded by credit, burdening the extreme spender with debt and interest charges.
Borrowing from tomorrow for today’s enjoyment can dilute the enjoyment you derive from a holiday (or any other lifestyle purchase) knowing todays spending is going to be paid for by tomorrow’s cost-cuts.
Money, just like Life, is all about Balance
As you’ve probably heard a thousand times before, life is all about balance. Yes, it is important to live each day to the fullest and never take a moment for granted, but each day must be balanced with a consideration for tomorrow.
Rather than spending because you enjoy spending, what does money mean to you?
Think about what’s really important to you and attached it to a financial goal! The next week’s credit card spree could be next month’s skydiving adventure (paid in full), or it may come down to the little things…
You don’t have to strike this balance perfectly, but for those who fall prey to unhealthy financial behaviours, anchoring personal goals to a financial plan can lead to you having (or doing) more of what is important to you and less of what is not.
Confronting your finances and striking a balance, rather than resorting to extremes, can lead to a more rewarding relationship with your money.
Get the balance right today and watch the same financial confidence begin to flow through to your bigger, longer-term personal goals.