Perhaps you’ve heard this term before, perhaps not. It refers to the idea that your spending will expand to consume all of the money available to it. This is where there will be a great need for self discipline. Or perhaps accountability to a partner.
If you are accustomed to being broke and now have been working to pay down bills, you may one day look at your pay cheque and think “I’ve made all of my payments for the next 2 weeks. I’ve been really good at this. I need a reward. I need new shoes.”
The need for new “shoes” may be real or imagined. It might be just a desire for new “shoes.” And I’m not talking about just shoes. “Shoes” are just a place holder here. “Shoes” could be anything that you’ve gone without for a while and want to buy. It could be anything new. A bigger TV. A newer phone. A flashier car. A gym membership. A Franklin Mint plate. A trip to the casino. Fishing gear. An $8 cup of coffee. New shoes. Anything.
You need to question yourself – and be honest – do you really need new "shoes" or do want to buy them because you’re tired of this whole budgeting thing? Are you wanting to spend money to give yourself a feeling of freedom? Is the purchase mostly about emotional gratification? If the answer is ‘Yes’ then you need to reconsider that purchase.
Marketers know how to push our emotional buttons. That’s their job. This sounds harsh when I put it on paper (or on electrons) but when it comes to making most financial decisions you need to think about the math first and your emotions second.
This doesn’t mean that you can never buy anything that you want. It just means that you you need to be thoughtful about it.
My mother the farmer used to say, “If you see something and you really want to buy it; don’t. If you still want it in a week, go ahead.” This was her way of building in a personal cooling off period. (In my province there is a legislated cooling off period for cold-call sales.) It gives a person time to re-evaluate their priorities.
You could ask yourself about the “shoes.” Do you really need them? Are your old shoes worn out? Do you need them for work? Are they trendy? Would they look good in your collection? Will your friends be impressed? Are you bored with not buying things?
Take some time and think about how you will feel about the purchase next week. Will you still be happy with having spent the money? Will there be other “shoes” that you’ll want and have no money to buy?
There is a psychological condition called “Buyer’s Remorse.” It takes place after a person has bought something that they thought would bring them happiness or satisfaction and they later find that they regret the purchase. They may feel disappointment, guilt or anxiety. Have you had Buyer's Remorse in the past? You’re less likely to get Buyer’s Remorse if you take some time to think about a purchase before you make it.
Slow down, take a longer view. Would the money spent on new “shoes” be better spent on something else or saved for later. Don’t let your lifestyle consume your life savings.
In the days when I got paid bi-weekly there would be 2 months a year with 3 pay cheques. I designed my spending to get by on 2 cheques a month. The habit I developed was to pay off any bills then, of the remaining money, I would spend half and save half. Same thing if I got a windfall. If I got a bonus. If I worked some over-time. If I found some money on the ground (I found $70 blowing down the street one day). First pay bills then save half – spend half.
A raise in pay happens now and then. If you allow your lifestyle to consume all of the new, extra, income you will end up in no better financial condition than when you started. You are accustomed to living on your old, lower, pay. When you get a raise, save half and spend half. You will still get some of the lifestyle creep you want (and deserve) but it will be slower than it would otherwise be. With a few raises over the years this system also leads to savings creep, with your saving rate increasing over time.
Savings act as a shield against financial hardship and over time, through wise investment, can contribute to income.
It worked for me. It can work for you.
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