The Top 3 Reasons To Spend All Your Money

“It’s important!”

“I feel like this is something that is a worthwhile investment.”

“It’s a memory and it’ll never happen again!”

What if you could be here? (source)

These are three things that I hear people saying to justify their desire to spend large amounts of cash when they have limited income. In particular, I hear this when it comes to large amounts of cash coupled with an uncertainty as to whether or not they even have it (vs a confidence that they can get it within the timeframe).

They believe it’s worthwhile to purchase that service, product, or experience and that the purchase justifies the means of stress, more work, or sacrifice.

But does it?

I’m not going to claim to have the answer to this question, but I do know that as humans, we are limited by the resources we have available. Ideally, you’d be balancing those resources across everything you value.

When something new (and expensive) comes around, you would either have to pull from those things you value or you will be thinking about how to afford/get/pay for that thing.

Bandwidth Tax is a real thing, and as we tax our resources, we tax our mind. This holds true whether you’re sacrificing your long term happiness for the right now or stressing to figure out how to afford said tax.

As we squeeze more into our metaphorical suitcase of outgoing money and shorten that cash flow gap — the gap between what we make and what we spend — we leave less and less room for and flexibility. We go from a having the financial flexibility of a piece of paper to a piece of steel.

Our single-mindedness can cause us to neglect things that might matter most to us. Sendhil and Mullainathan propose that scarcity imposes a kind of bandwidth tax on us. The poor are not just short on cash; they are often short on bandwidth. Faced with pressures to take care of basic human needs, there may be reduced cognitive capacities for the demands of work, parenting, and self-care. (source)

If you’re the kind of person that

• feels like you’re spending too much time working, or
• like you’re trading dollars for hours and it’s not fulfilling, or
• that you don’t have any time because you’re spending all of it just to make ends meet

Then, unfortunately, there are a few truths that you just have to accept.

1. You MUST balance your spending across all of your values. I give you a method to do this in Mindful Money.
2. By spending a large amount in one area, you’re taxing another. Remember you DO have limited resources.
3. Time will be your friend in the pursuit of making the best of those resources. You can’t create more time, and living holistically means keeping your life in balance as well.

If you’re not this kind of person, then nevermind, because most of this advice won’t apply to you anyway.

With these things in mind, realize that the further taxing your time, your mind, your values, or your wallet is one step closer to unhappiness and a lack of fulfillment — you’re setting yourself up for one of two scenarios:

Either you’ll end up regretting spending the money, or you’ll force yourself the make that extra $500 or $1,000 per month to make ends meet.

The regret won’t be because you don’t value that big purchase, but moreso because you would be financially unable to contribute to the other valuable experiences in your life that bring you happiness. You’ll be left mentally and emotionally taxed.

If you tax your time, you’ll be further stressing your already limited time and causing a physical tax as your stress levels rise and there becomes an imbalance in how you spend your time.

You see, when you shorten that gap between what you make and what you spend — when you have money going out faster than you can replenish it, you are creating an unsustainable financial situation that requires far more attention, maintenance, and thought. Aside from making you dumber, these kinds of situations make it increasingly more difficult for you to prepare for the unexpected expenses such as taxes, old debts, and legitimate emergencies.

Is your future security worth sacrificing for a moment of egoic satisfaction?

Before you answer, consider that we’ve been sacrificing the right now for the bigger solution on our planet for two centuries and are beginning to feel the impact of that kind of decision making.

(source)

So what do you decide?

If you’re still up in the air, you’re not alone. Even babies experience this paradox. Ever hear of the Stanford Marshmallow Experiment?

I’ll say only this: you’ve always been okay, and you’ve always had enough. It’s only when you decided that the right now is more important than the long term vision that you felt stress.

No matter what your goals, it’s been proven that you will be more successful all around if you just wait.

Don’t get me wrong, I do recognize and acknowledge that sometimes unexpected needs for spending arise and there’s nothing you can do besides pay them - an emergency medical situation, expenses required to continue to make you money or increase what you’re being paid, a car repair, etc.

The ONLY thing you can do to make these moments more bearable is to prepare for them.

This means:

1. Have less money going out than coming in. Consistently.
2. Be clear on your value system and how that’s represented through money. We facilitate this for you in Mindful Money.
3. Don’t spend money on those things that you want until you have enough saved for that specific thing. This is also something we facilitate.
4. Ensure you have an emergency savings in place before any large spending. This would cover the legitimately unexpected expenses.
5. Realize and acknowledge that you will be “cutting the line” in your value system and taxing yourself in some way, whether that’s time, intelligence, or your overall long-term happiness.

Is that big expense worth the sacrifice of happiness in other areas? Family, friends, your mind? Is it worth it? You tell me.