When Sacrificing is Too Much of a Sacrifice

Within the personal finance community, much is written about ways to save money. Some of us drank so much of this kool-aid™ that we’ve sworn off our Starbuck’s coffee entirely and never go out to eat anymore unless it is a really special occasion, all for fear of not saving enough for our collective retirements. I think that the problem with this type of behavior is that there is not a realistic understanding of typical human action and reaction.

Just a simple skip-a-day philosophy when it comes to paring down expenses easily can morph into an all-or-nothing mentality. The problem with major change though, is that most people cannot sustain it. Talk to anyone who is trying to cut down on their eating, start exercising more, or even trying to quit smoking. Personal finance changes are no different. And in fact, they effects of an all-or-nothing mentality might be worse in this case than some of the others.

The proof is in the pudding….or wallet

An all-or-nothing attitude might sound like this for a dieter: “Well, I’ve already blown it on the dinner, might as well go for dessert too!” or “Since there’s no way I can get through this weekend without blowing the diet, I might as well eat what I want now, and then maybe I can start again next week.” Anyone who has tried personally to lose weight or has been close to someone going through it knows what I’m talking about here.

However, the all-or-nothing mentality also happens in personal finance, but its a bit more subtle. “I already spent 40 dollars more on mom for her birthday, so I need to spend 40 dollars more on dad too.” or “I know I have credit card debt, but I am on vacation and I can just work some overtime later and pay it off.”

These types of thinking are indicators of the all-or-nothing mentality. On the surface, this mentality seems like it is not a big deal, but in reality, it is. For personal finance, this kind of mentality will easily put you into deep credit card debt, cause you to over extend yourself on a mortgage or car loan, or on the other end of the spectrum, cause you to live like a church mouse even though you have gobs of money invested and available.

Balance is the Key

Like most things in life, balance and moderation are the way to go when it comes to personal finance. If you find yourself on a binge or out of control, there are some interesting ideas to help you get some perspective:

- Often times, when trying to be good, we feel so far behind the eight ball that we cannot manage to shake the bad feelings we have about ourselves. Chances are, if you live in the United States, even if you are poor, you are much richer than most of the world. Check out this site to get a perspective on how many people are really worse off than you are. So, you don’t really need to buy any more stuff. Tons of people are living just fine without these things, so can you.

- Don’t focus on the money. Focus on getting happy. Usually, habits of spending and bad money management come from a need to feel better. By figuring out why you are unhappy, and honestly confronting those issues head-on, you will resolve them and create a more content environment for yourself. And the financial need to go all-or-nothing will disappear. What’s more, often these issues are focused on relationships and working these issues out costs much less than the stuff you are buying.

- Physically work and consider a second job where you would sacrifice some of your free time. People generally are doing one of two things with their time, either spending money (via shopping, using services, or eating/drinking) or saving/earning money (by working). By making sure that you have less free time by taking it up with work, you might find you are less bored and more able to save.

- Volunteer some of your time. It makes little sense to give money when it is something that is so scarce for you. However, by giving your time, you will be able to feel like a better person and that your life has a purpose other than to go to work to make money and pay off debt. This can make a big difference.

If you dwell on the other end of the spectrum, that is, perhaps you save so much that you aren’t really enjoying yourself like you perhaps should, I have some ideas for you as well:

- Instead of placing all of your funds into dedicated accounts that are related to emergency funds, or short-term goals, or even retirement…consider a new category: mad money. This Mad Money can be a small portion of the funds that you save, say 5 or 10 percent. But this amount that you save will be for completely reckless “I-want-it-because-I-want-it” purchases. There need be no thinking or explanation given before purchasing anything with mad money. This mindset might help free you up a little bit about spending.

- Consider giving a portion of your money to a worthy cause or charity. Often times, we may not want to spend money because we feel it is a waste. Choosing a charity that you think could use your support might be a great way to loosen that grip on the wallet.

- Give to family early. Often times, people think that they need to wait until they die to leave money to their families. If, however, you know that you are going to have a significant sum to leave to your family, you might consider giving portions of it as a gift before you die. This, if done properly, can avoid taxes on the funds and also give you the joy of helping family members and friends that might need it.

Sacrificing Should Be Worth It

Whatever your situation, make sure that the trade-off is worth it, and attempt to get to the center. Give to a worthy cause, either your time, your money or both. This will ensure that you keep some perspective regarding your resources and will also keep you open to your money. Money will come and go, but the feeling and knowledge that you can earn money and are talented and self-sufficient is where there is real value.

Sacrifices are often made in the world of personal finance. Personal time is sacrificed to get a second job. Vacations are axed to save more money. Gift sizes are reduced to stay within holiday budgets. The sacrifice becomes too much, however, when it is clear that you are not enjoying what you do. Earning money, saving for the future, and giving gifts to family, friends, yourself, and to charity should all be enjoyable parts of life. If they aren’t, you might need some perspective. Because, if you aren’t happy, your personal finances won’t be either.