For fun, I took this quiz, "What kind of spender are you?", and learned I am a "controlled spender". I'm a great saver but don't want to let go. The quiz says, "These 'tightwads'…are uncomfortable with spending which can cause them to freak out when faced with a financial emergency." I've never thought of myself as a tightwad, haha, but someone out there does!
Through my work and conversations with friends and family, I’ve learned everybody has a different relationship with money. Some of us are great at spending it, but not so great at saving it. Or vice versa: great at saving but have a hard time spending. Ideally, we'd all have a healthy relationship with money and experience the perfect harmony of spending and saving. Let's get real though; that's tough to achieve.
I tilt to the saving side. What can I say? I grew up with a dad whose job is to help people plan and save for retirement. From an early age, I was learning how to save, not so much how to spend. He would always comment on how fun it is to watch your money grow.
While I don't necessarily identify with being a "tightwad" I do identify with being a "controlled spender". I'm calculated in how and when I spend my money, and I always make sure I save before I spend.
Aspects of my money behavior I picked up on my own, but the foundation for my treatment of money comes from principles taught by my parents. These principles have ultimately guided me to a healthy financial position. I do acknowledge certain privileges I've experienced throughout my lifetime, like graduating college without debt; school debt is an ominous cloud that looms over most of my generation, making it difficult to get a strong foothold on our finances. However, I've also worked to be a good steward of my money and committed to a few principles early on.
- My money principles:
- Never spend more than I make
- Pay my credit card bill in full every time
- Automate my monthly savings
- When I get a raise, so does my 401k
- Have 3 months' worth of savings for emergencies in my bank account
If you can build healthy financial habits early on, your future self will forever be thankful. Never spending more than you make and paying off your credit cards in full every month keeps you ahead. Escaping debt can be extremely challenging; especially if you become used to a lifestyle you can't afford.
My definition of financial security is three months of emergency funds, living within my means, and saving for my future self. An easy way to get started is to automate savings. Every paycheck, money goes into my Roth 401k and to my savings account. What's left over goes to checking. This helps me gauge how much I have available to spend. The savings are automatic so I don't have to think about what I should save this month; rather I know I've saved what I needed to save, and now I can spend what's available.
When you're young and starting out you don’t need to save a ton to see a huge impact. Saving 10-12% of your paycheck is recommended. And if this seems too much, ask yourself what's more important to me: retiring earlier or one night of Uber eats? If you don't do the 10-12% today, you will have to make up for it later in life. At that point, time is no longer on your side. You will need to save 18-20% of your income to reach the numbers you need in retirement. I am a huge advocate for starting early and letting the market do most of the work for you. If you wait too long, your paycheck will have to do most of the work. I once read, "If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing." This message has really stuck with me, and it really hits home when you look at a compounding interest chart.
(Read the above Business Insider article for an in-depth explanation of the chart.)
Clearly, "controlled spender" makes a lot of sense to me. I am choosy when it comes to spending my money. However, I am working towards spending money more freely and with less guilt (because guilt is not healthy). For right now though, while my obligations are minimal (no kids), I've decided saving is a priority. There will come a day where my spending will be less controlled, but for now, I am committed to putting as much away as I can, so when the obligations arise, I can comfortably reduce my monthly savings. Why? Because I did a lot of the hard work ahead of time. The controlled spending and dedicated saving today will give my future self and family choices. I believe financial freedom is living in an "and" world, not an "or" world.
So, I encourage you to take the quiz and learn what type of spender you are. Maybe you're the perfect balance of spending and saving! Or maybe you're an uncontrolled spender and need to shift some current habits. Whatever you may be, taking the time to think about how you view and use money is valuable. You'll likely identify areas in your financial life that could benefit from a new habit or an upgrade. I realized I need to shift my mindset when it comes to spending. While I plan to continue abiding by money principles, I also plan to loosen up and enjoy the money I've earned. Being a "tightwad" stops me from donating to causes I love or going out to eat with my fiancé! While I enjoy watching my savings account grow, I enjoy an occasional night out and sharing my profits much more.
Quiz: What kind of spender are you?
~ Rachel Bubb