Spend or Save by Tanya Rolfe

The world around us is built to make us spend more money, says Sophia co-founder Tanya Rolfe. Here's how to resist the siren call of consumerism with a balanced and practical approach

In today's consumer-driven society, we often find ourselves grappling with the spend vs save dilemma—a perpetual battle between indulging in immediate retail gratification or prioritising long-term financial security. Here we are going to take a dive into the intricacies of this common dilemma, exploring the psychological factors, societal influences, and practical strategies that can help us recognise the pressures and triggers that we face, and how to strike a healthy balance between spending and saving, ultimately leading to enhanced financial wellbeing and guilt-free living.

First, build an emergency fund

Before we can explore strategies to navigate this tug-of-war like spend/save issue, it is really important to first have your emergency fund in place. Saving for an emergency fund is like having a financial safety net that can protect you from unexpected bumps in the road. Life has a tendency of throwing curveballs at us when we least expect it, whether it's a sudden medical expense, a car repair, or even a job loss. Having an emergency fund equivalent to three months of your living expenses in place is your foundation, and it is a priority. An emergency fund brings peace of mind and security and during challenging times, can cushion the blow of what might otherwise be a disaster. 

Not only does saving for your emergency fund bring you financial security in the short term, but it also sets you up for lifelong financial security. By regularly setting aside a portion of your income for emergencies, you develop disciplined saving habits and enhance your overall financial discipline. This habit can positively influence other areas of your financial life, such as budgeting, investing, and achieving future goals. On top of this, once you have your emergency fund in place, you will have the confidence to make financial decisions independent of financial stress and start to plan how you will enjoy your money going forward. 

So, let’s imagine you have your emergency fund safely nestled away, and you now want to plan how you divide your income going forward. What should one consider when deciding whether to spend or save? 

The pull of instant gratification

The psychological urge toward instant gratification is powerful, and its allure has an impact on our decision-making processes. Instant gratification refers to the desire for immediate rewards or pleasures, often resulting in impulsive spending behaviours. This psychological phenomenon taps into our natural inclination to seek pleasure and avoid discomfort. When we succumb to instant gratification, we prioritise the short-term pleasure of acquiring something new. Being able to avoid this drug-like allure is tricky but can help to avoid accumulating debt, financial stress, and hindering your progress towards important goals. 

To avoid impulse spending, it is crucial to cultivate self-awareness and employ strategies that counteract the impulsive urges. Here are some strategies that may work for you:

Implement a waiting period before making purchases. Maybe you give yourself a 24-hour cooling off period so every time you want to purchase something over $200 your rule is to wait 24 hours. This gives you time to reconsider if this is really what you want. 

Recognise emotional triggers. Be mindful of your emotions and identify what triggers your urge to spend. Whether it's stress, boredom, sadness, or even excitement, understanding your emotional triggers is the first step toward addressing them. Increasing activities that counter these emotions is a great way to stop the urge. 

Create a budget and a financial plan, and stick with it. If it is not within the budget, then it is simply not an option. 

Societal influences that make you spend

Societal pressures to consume exert a significant influence on our spending habits and financial decision-making. Everywhere we are bombarded with messages that sell us a story of happiness, success, and social acceptance if we just buy their products.

Advertising and social media contribute to a pervasive culture of consumerism that urges us to constantly seek the latest trends and products in order to be accepted by our peers/others. The fear of missing out and the desire to fit in often push us to make impulsive purchases, even when they may not align with our true needs or financial means. 

Constantly keeping up with the Joneses on a cycle of consumption can lead us into financial debt and depression. Limiting our time on social media can aid in removing temptation but it is still important to keep a critical mind along with a healthy dose of cynicism when it comes to adverts you see. Always keep in mind your own values and priorities.

The balancing act

Now let’s imagine you have your emergency fund nestled away and  you now understand how to avoid constantly seeking instant gratification. You understand how you might be unconsciously driven to consume more through different social cues.

Spending is a natural part of life that allows us to fulfil our needs, pursue our interests, and experience enjoyment. Money is a tool that can enhance our lives and bring us joy when used mindfully. Mindful spending involves being intentional and conscious about how we allocate our resources, ensuring that our financial decisions align with our values, goals, and overall wellbeing. 

It's about finding a balance between enjoying the present moment and responsibly planning for the future. By being too far in any one camp, we can limit our enjoyment of life but by embracing mindful spending, we can savour the experiences and possessions that genuinely bring us happiness, while avoiding excessive or impulsive purchases that may lead to financial stress. 

Mindful spending encourages us to consider the long-term impact of our spending choices and make decisions that contribute to our overall happiness and financial security. 

When we approach spending with mindfulness, we can find harmony between enjoying our money and our life and nurturing a healthy relationship with money, too.

Tanya Rolfe is a co-founder of Sophia. She is also a co-founder of Harriet, which helps female founders fundraise capital, and host of The Money Makers Podcast, which interviews inspiring women in finance and female founders in Asia.

Front & Female’s Wealth With Sophia series is a collaboration with Sophia, a financial education platform built by women for women, to open up the conversation about money and help drive female financial literacy. The series covers all things money and investing to enable women to gain the confidence to take control of their wealth creation.

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