Guilty About Spending?

A friend of mine took an impromptu trip to Goa with her children, had a wonderful time there but returned feeling guilty about spending through the nose. Another woman I know has a habit of sneaking in her shopping bags in her husband’s absence so that he wouldn’t know about her extravagance. Incidentally, both these women are financially independent and make good money. This leaves me wondering; why do women feel so guilty about spending money even if it’s their own?

Most women are programmed to feel guilty. In fact it is wired into their DNA. They feel guilty about having yelled at the kids, about ordering food from outside over the weekend instead of cooking themselves. They feel guilty when they shop for themselves or pamper themselves at a spa. In fact any kind of indulgence leads to guilt. Well nothing can be done about feeling guilty after yelling at the kids; for everything else consult a financial planner.

A lot of guilt, especially around spending, comes from not knowing where you are financially and where you ought to be. A little planning can help you by checking your cash inflows and outflows systematically, planning for a surplus every month and last but not the least planning investment in line with your future goals. I believe that once your necessary outflows in terms of routine expenses; EMIs, rentals, education expenses and insurance premiums have been taken care of, set aside some money to spend as you wish. Call this discretionary spending fund. Now that you have earmarked this money for your own consumption you will find it easier to let go of guilt. More so as you have worked hard for it, you have the right to be happy.

Cheat sheet for guilt free spending:

1. Create an annual budget for discretionary expenses. Break it down monthly and give yourself the allowance to spend within that limit each month.

2. If you would like to splurge once or twice a year on big holidays or purchases, start saving from the start of the year. Start a Systematic Investment Plan (SIP) for 12 months. Redeem it at the end of the year. Use this to pay for your holiday. Doing this will ensure you don’t dip into your monthly budget to fund such expenses and you would also earn higher return than a savings account.

3. If you are married, create a separate account for your discretionary expenses after budgeting for essential expenses and investments. Use this money without guilt.

4.  Use a debit card for your discretionary expenses. This way you ensure that you don’t spend more than what you have. It would save you the guilt of high credit card bill the following monthJ.

5.  Get more bang for your buck. Look out for discounts or deals on things that you enjoy spending on; clothes, footwear, and perfumes or anything under the Sun.

Step by step guide to build your spending money:

1.  Set aside 10-20% of your disposable income for investing for your long term goals such as retirement planning or children’s education. If you receive a bonus, it must be used for clearing liabilities such as loans first, before using for discretionary spending.

2. Add up all your expenses and average it out into monthly expenses. Regular expenses are more or less constant every month such as EMIs, rent, utilities, domestic help, groceries, fuel etc. Insurance premiums, property tax, and school fees are generally annual. These can be termed as your needs. Once these needs are taken care of set aside some money each month to build at least six months of average monthly expenses in your account as emergency fund.

3. The remaining is what you can spend on your wants. Creating a budget would give you better control of your finances and you will free yourself from the guilt of spending. All you need is a start.

It’s a good thing to spend on you. Go meet your friends for lunch in a nice restaurant, get a smashing haircut, indulge yourself at a spa, and buy yourself that dress you have been eyeing for quite some time. Go ahead; it will not break the bank! Do it! Guilt free!! Stay Blessed!!

Before You Quit Your Job

Incidentally during the past week three different people have called; seeking advice on quitting their respective jobs. Let’s call these gentlemen A, B and C. Mr A is stuck in a bad job with a very bad boss (common scenario :-)). Mr B is also unhappy with his current job and is inspired by his distant cousin who according to him is a full time investor. He too wants to follow his footsteps and attain financial freedom. And last but not the least Mr C wants to follow his passion- photography. As for Mr A and Mr B I agree one hundred percent that getting stuck in job which you don’t like can be quite frustrating and painful but decisions taken in frustration are seldom good ones. Mr C was very candid when he said “enough is enough”. “I want to be happy; do whatever I want and whenever I want; not whenever my boss permits”.

 This makes me worried. Not that I mind playing the devil’s advocate but quitting a job is one of the most important decisions of one’s life especially if you have dependents; and secondly quitting a job to follow your passion might be a lovely thought except when it comes to your finances. There is no dearth of people who want to be their own bosses and do bigger and better things with their little time on this planet; but again there is no dearth of people who take this decision in haste and then regret. I am concerned about the latter. Nevertheless if you have decided to quit; please do so but ask yourself following questions.

1.      Do you really want to quit?

Can you follow your passion along with your work?  If yes, then do not quit. In fact read somewhere that ignoring your passion is slow suicide. Never ignore what your heart pumps for. Mould your career around your lifestyle not your lifestyle around your career. But instead of quitting your job right away, try freelancing on the side, testing the waters. See if you can actually monetise that and create a business / enterprise out of it. You may learn new skills and acquire better qualifications if you have to. In other words have a plan B. Quitting the job must be the last resort when the burden is unbearable. In our case Mr C can certainly follow his passion alongside and be happy.  

2.      Do I have the family’s support?

Quitting your job must be an informed decision and should not come as a shock or surprise at home. I know somebody who did not tell his wife for good two months that he had quit. Do talk about it at home. You cannot bring in turbulence in otherwise smooth sailing lives of your wife and children.  Mr A, Mr B and Mr C have school going children; while their wives are home makers. All the more reasons to have a buy into this decision from their better halves.

3.      Am I placed comfortably on my finances?

Quitting a job and living a fulfilling life is not as easy as it appears. Things get scary at times because all said and done we get used to the fixed cash inflow every month. Before you take a decision to quit, check your savings. Ideally you should have 30-35 months expenses; along with zero financial liability. Pay off all your loans before you quit. In fact it’s not a bad idea to practise lean living a year before to avoid instant compromises. Do not get inspired by a friend or an acquaintance who’s a full time investor (Mr B in our case) and makes handsome money. You need to put in money regularly to grow your wealth. Only speculation would give you instant money but then it can also take away your money instantly. In case you plan to start your own business; start saving for initial capital before quitting. And once you start, keep your expenses low till you start generating income.

If the answers to above three questions give you confidence then follow your heart; break free, get going and honour your path.  After all you have a right to live as you want and do whatever you want in your limited time on the planet Earth. Stay Blessed!!