I work full time at a local bookstore and try to save a little money each month. I am 28 years old and one day I would like to have my own place and a family.
But my friends keep saying that it’s impossible to even hope for such a future when we’re saddled with student debt, housing prices are only going up, and there’s a rising cost of living.
They say I might as well enjoy my life, spend what I earn, travel and have fun. Part of me thinks they’re being irrational, but why should I save when I’ll never earn enough to have the life I want?
Fatal spending could be a short-sighted strategy, not only financially but also psychologically
Money psychotherapist Vicky Reynal responds: It sounds like talking to your friends has left you pretty discouraged about your future financial prospects. It is difficult for many people of their generation to feel that they have much agency to achieve a financial future similar to what they saw their parents achieve.
What your friends describe is known as “fatal spending” and is clearly tempting to them, as it makes them feel as if they have a sense of control, at least in their short-term enjoyment. That’s a lot easier to do than sitting with the helplessness and “financial helplessness” that comes with saving money but feeling like it’s going to get you nowhere in the long run.
But this kind of fatal spending could be a shortsighted strategy, not only financially, but also psychologically.
Firstly, because you may find that the benefits of spending (such as the euphoria we get from buying something we like and being impulsive with money) don’t last long, while the guilt that sometimes follows means you may Don’t end up feeling better as such. as a result of their expenses.
You might also feel guilty if this strategy doesn’t quite convince you and a part of you knows it’s hurting your freedom to change your mind in the future. It will also decimate the fund of money you have been accumulating.
Second, if spending comes from the “wrong” emotional place, you can easily spiral and end up spending more than you can afford.
What do I mean by “wrong” emotional place? Rather than being a deliberate, conscious choice (“I’m going to enjoy this money and I’m happy to do it”), it comes from anger. Or maybe spending becomes the way you deal with your financial anxiety about the future.
But if you end up in debt as a result of spending mindlessly and impulsively because you’re angry and frustrated, then you could have sabotaged not only your future financial prospects but also your short-term financial situation. And that won’t help how you feel.
In fact, you will add financial anxiety to the mix of feelings you have because you will have compromised your short-term financial resilience by your inability to meet unexpected expenses. Instead of feeling freedom, you may be left with a feeling of precariousness and instability.
I’m not recommending that you hold on to false hopes, but you can focus on what you can do to be in a better financial situation in the future. Consider alternatives to the financial goals you had initially envisioned if they seem unattainable.
Homeownership may seem unlikely. So can you afford to replace it with goals that still seem valuable and that, with a little smart budgeting, you can still take pleasure in achieving and satisfaction in getting?
You can allow yourself to feel anger at the uncertainties you have to deal with, such as the high cost of living, frustration at the out-of-your-control nature of factors that really affect you (such as inflation).
But instead of acting out the feelings and almost spending your hard-earned money in anger, you can acknowledge them, talk about them with your peers, and then think about what is under your control.
Have a small savings fund that with time and a little exponential growth (compound interest in financial terms) could accumulate more than you intuitively imagine.
It may not be the down payment you had dreamed of, but it may be a good enough sum that will still give your future self a sense of accomplishment and freedom to make an investment that feels worthwhile and gives you a sense of of achievement. of.
What I invite you to think about is whether that is not more worth it than spending money impulsively to reach short-term highs without taking the future into account.
Your current self may not care now about having money available for larger investments in the future, but your future self might think differently. You should also keep your future self in mind so as not to sabotage your future options.
- Do you have any questions for Vicky Reynal? Email Vicky.Reynal@dailymail.co.uk