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.