Is Spending Money Bad? Ideas for Smarter Spending

Is Spending Money Bad? Ideas for Smarter Spending

In a perfect world we wouldn’t run up credit card debt. We would stay within our monthly budgets, avoid overspending, and never have to stress out about having enough money to meet our needs.  But as we all could attest to; the world is not perfect.

We all have the urge to spend money.  With advancements in mobile devices, eCommerce, and payment technologies, it is now easier to spend money than ever before—no wonder it can be easy to develop poor spending habits.

When it comes to developing good financial behavior, some experts will tell you that spending money is bad and saving money is always good. It is easy to associate spending with unfavorable financial decisions like racking up credit card debt and depleting your savings account.

Though some people assume spending prevents them from reaching their financial goals, it is not the root cause of most people’s financial problems. Instead, it is the mindset with which we go about spending that gets us into trouble.

Spending itself is not inherently bad. We have to spend money in order to participate in the economy and  sustain even the most modest of lifestyles. It is when we over spend, impulsively buy, and live beyond our means when spending turns into a bad thing. It is when we mindlessly “put it on the card” without checking our balance, or fail to account for future expenses, that spending can develop into a negative habit.

If you fail to spend in a thoughtful and forward-thinking manner, spending can have a negative effect on your financial wellbeing. Yet if you practice smart spending—and combine it with other positive personal finance habits like saving and budgeting—it can help you attain your financial goals.


Creating a Positive Spending Mindset

As with most things in life, good outcomes start with good attitudes.  To avoid the negative outcomes of poor spending habits, you need to develop a positive spending mindset. Rather than avoiding spending all together—or viewing spending as a negative action—learn how to spend wisely. Here are some considerations to keep in mind when developing your own positive spending mindset.


The Distinction between Smart and Frivolous Spending

There is a big difference between smart spending and spending frivolously: one is necessary to maintain daily life while the other can hold you back from achieving financial success.

It is important to shop and spend with intention and thoughtfulness. Doing so will help you  avoid unfavorable financial situations, like taking on too much credit card debt. One of the best ways to spend intentionally is to create a budget. “Budgeting” is one of the big  buzz words in the financial blogging and coaching industry, and rightfully so. Budgeting allows you to prioritize and organize your spending, account and prepare for future expenses, and take control of your overall finances.

Most importantly budgeting allows you to live within your means, which is  the foundation of a solid financial plan. Ensuring that you do not spend more that you earn is the best way to stay out of debt. Of course, incurring debt for large investments—such as taking on a mortgage or investing in your children’s future—is usually a reasonable financial decision. However, it is best to avoid taking on debt for day-to-day expenses and instead sticking to a thoughtful budget.

When we spend frivolously—buying unnecessary items, giving into impulse buys, and failing to keep track of how much we spend—we are setting ourselves up to be over-budget. Though everyone deserves to treat themselves from time to time, it is important to put thought into every purchase we make, especially when they are large purchases. Next time you buy a “non-essential” item, ask yourself; will this purchase prevent me from covering my unpaid expenses? Will I get genuine value and/or use from this item? Will I regret having bought this item in the future? Asking yourselves questions like this will help you spend thoughtfully and wisely.


Improving Your Relationship with Spending

If you are like me and grew up in a household where saving money was the norm, you may feel a bit of guilt from time to time when you spend money. Yet we shouldn’t necessarily feel guilt around spending money.

In order to have an overall positive and healthy financial mindset, we must develop a positive and mature relationship with spending. So long as we practice smart and thoughtful spending, and avoid frivolous and impulsive purchases, there is no need to feel guilty about spending our hard-earned money.

As the saying goes: everything in moderation. This includes spending.


Know When to Spend and When to Be Frugal

Let’s talk about frugality. Frugality gets a lot of attention from personal finance “experts”, as they see it as a sure way to attain financial comfort and freedom. In fact there is an entire financial movement centered around frugality; the F.I.R.E. movement encourages frugal living  as a way to achieve early retirement and financial freedom.

Though for some a frugal lifestyle is worth it to attain early liberation from the working world, it is not an easy lifestyle to live—especially when you have a family. Yet even a less extreme version of frugality is often encouraged by some personal finance gurus.  Be it buying generic or store brands, using coupons whenever possible, or shopping at thrift and second-hand stores: there are many popular techniques to spending minimally.

But is frugality worth the effort? Does having frugal spending habits have a significant impact on your long-term financial success?

The answer to these questions remains controversial in the world of personal finance. Our take: it can be a good way for families with limited financial resources to stretch purchasing power of their dollar. Any marginal savings you make from frugal spending can be applied to finical goals, which is a plus. Yet as we emphasized above: everything in moderation. Just as you should moderate your spending, you should do so with frugality as well. If a frugal mindset starts to become a strain on your overall financial wellbeing, it may be time to reevaluate your spending strategy.


Save Now, Spend Later: The Importance of Setting Goals

Most financial “experts” would agree that saving is an important and foundational personal finance habit. It is recommended that we save between ten and twenty percent of our disposable income. This means allocating at least a tenth of your paycheck towards retirement savings, emergency funds, or long-term investments.

This mentality of saving is rooted in the idea that we make sacrifices now to have a better and more secure future. This idea is at the center of financial planning, where long-term financial wellbeing is the ultimate goal.

Establish a goal, save towards that goal, and achieve the goal: it is in this last step when smart spending takes place. This process of goal setting allows you to make calculated and thoughtful purchases and avoid buying frivolous purchases that are detrimental to your budget.


Long Term Versus Short Term Goals

What about saving for short-term goals? Saving is important, but not all saving is long term. As important as having a financially secure future may be, it is also important to establish short-term financial goals. Identifying weekly or monthly goals is integral to developing a positive spending mindset. You can use the same mentality used in long-term financial planning to set short-term financial goals.

We like to think of these short-term goals as “wish list” items. More substantial spending decisions—such as buying a house or new car—can be thought of as long-term financial goals. Smaller, short term purchases—like a new pair of shoes—can be added to a wish list. Just as you would establish and plan out large financial goals, you can shop around for items and add them to your wish list. Then when you have extra money outside of your weekly or monthly budget, you can save it towards your wish list items. Thinking about these smaller purchases as wish list items—rather than financial goals— will make saving for these items more manageable, fun, and attainable.


How to Achieve a Smart Spending Mentality with the Wallit App

Though we believe saving money is a timeless and integral aspect to achieving financial wellbeing, at Wallit we do not discourage users from spending. In fact, we encourage our users to spend their hard-earned money—but in a smart and thoughtful way.

We recognize the importance of setting a financial goal, saving up towards that goal, and the spending the money necessary to finally attain that goal. What I’ve described here is an example of smart spending.

Our goal setting and tracking feature allows users to set financial goals and track their progress. Whether it be a child saving up for a new toy or video game, or parents saving up for a family vacation or new car, the Wallit app allows teens, children, and parents to create and attain financial goals.

The great thing about the way we’ve set up the Wallit software is that goal setting is not only a highlighted feature, but a social one at that. You can share your goals and progress with family and friends, which helps keep you motivated to achieve them. Like many other aspects of our life, money management no longer has to be a individual and private experience. Technologies like Wallit can make your personal spending experience shared, fun, and social.

What are your spending goals? How about sharing them with your friends and family using Wallit!