Healthy Spending
Most people are aware of the importance of saving money. But few people pay attention to the flip side of that coin — healthy spending.
A lot of financial advice paints a lopsided picture of money management. It pushes frugality, encourages people to second-guess their purchasing decisions, and tends to rely on guilt and anxiety to shame people into spending less.
This strict approach is demoralizing and, even worse, it doesn’t work for most people. While you may be scared into a high savings rate in the beginning, living like a hermit isn’t sustainable over the long run.
The same thing is true for dieting. You can drop a lot of weight by eating nothing but eggs. But at some point you’re going to get so sick of eggs that you wind up binging on Big Macs and hiding the wrappers from your family, compounding your guilt further.
Swinging from one unhealthy extreme to another doesn’t get you down the path to health — physical, financial, or otherwise.
Everyone spends money. The trick is to do it in a way that keeps you satiated and moving toward your financial goals.
The 2x rule is an easy way to engage in healthy spending. As Nick Maggiulli explains in Just Keep Buying, the rule is simple: “Anytime I want to splurge on something, I have to take the same amount of money and invest it as well.”
Dying to see that Halluci Nation show coming through town? No problem, as long as you budget for double the ticket price and invest the rest.
Think a pumpkin spice latte will give you the boost you need to do your best work? Ok, but take the same amount you used to buy the drink and drop it into an eTrade or Robinhood account. A lot of digital investing platforms do not have minimums to open an account.
Maggiulli also suggests limiting your spend to things that will make you feel fulfilled, like experiences, gifts for others, or occasionally treating yourself.
If you can limit spending to things that will contribute to long term happiness, and pair that with investing to build long term wealth, spending can be a guilt-free, positive experience.
