Friday, 13 December 2013

Are you and over-spender or an over-saver?

The way we think about money is different for every person and has a lot to do with the way we are raised and the circumstances and life experiences we have been through. I am sure we all know the person who is unable to save 2 dollars - they spend every last penny they have on silly things - cars, holidays, good clothes and food - and they have no savings or investments to show for it.

Conversely I am sure we all know the person who could afford to loosen the purse strings a little.  They earn quite well though are so tight you wonder when they are actually going to spend all that money they are saving. They do not enjoy the money they earn and they could definitely do with (and afford) a nice long vacation.

Are you an over-spender or an over-saver?

So where do you fall - I think we all instinctively know which side of the coin we fall on.  Perhaps you are the type of person who finds it really hard to save for a house deposit because you seem to blow your cash and you have no idea where.  Or perhaps you are the person you has not treated themselves to anything for as long as you can remember.

Assessing where you fall on the spectrum is important when it comes to setting your financial goals and working out what you
want to do.  In fact you can probably tell what type of person you are by the type of people you judge.  For example if you typically shake your head at those who cannot save a dollar (or who "could save so much more") you are probably a person who values saving more than spending while conversely if you get really worked up with 'tight' people you may be a person who likes living in the moment and cannot comprehend why a person would save.

Why is it important to think about?

I recently did a post on setting your financial goals for 2014.  When you are thinking about your goals and your strategies to achieve them, your goals should reflect what you find it hard to do.

For example if you are an over-spender your goals and strategies should reflect ways to save money.  If you are really good at saving, a savings target is typically very easy to achieve, but forcing yourself to take that $5,000 holiday may be much much harder, and so your goal may involve booking a trip as soon as you get to a certain amount instead of banking the cash.

Most of us are somewhere in between

We all fall somewhere on the spectrum, instead of at either end.

For example - I am the type of person who spends far too much money out of my wage although I find it really hard to spend when I receive lump sums of cash.  I will quite happily spend $1,000 more than I want to each month on going out and partying but I will "umm and ahh" for months on spending $10,000 on a car when effectively they result in the same outcome over a year.

Other people are exactly the opposite - they will easily buy big purchases impulsively but are amazing at saving in every day life.

Working out where you fit on the spectrum can better help you achieve your financial goals.  My goals are going to be a mixture of trying to curtail my low value impulsive spending, but allow for big purchases which I do not allow myself that often.

Before setting your financial goals think about this issue and think about how and why you spend money and what you find it easy to spend on and what you find hard to do.

You May Also Be Interested In
Start thinking about your 2014 Financial Goals
What should I do with my bonus?
Know your investment bias
When to buck the trend and ignore the share market

No comments:

Post a Comment