Experts in the field of behavioral finance have done much research on the emotional reasons why people are savers versus spenders. Being a saver is typically good for your financial security, but it may come with some emotional baggage.
People who save may not just be savers, but may also have an aversion to spending to the point that it can evoke dread, emotional pain, and regret when they make a purchase. In the world of behavioral finance this person would be categorized as a tightwad. This trait is different than frugality as those who are frugal tend to make better use of resources to make themselves feel positively. Alternatively, those who feel badly when they spend avoid it due to the negative association they have with spending money.
Could this be describing you? If so, ask yourself the following questions the next time you consider making a purchase.
Have you budgeted for it?
Do you have the funds to pay for it?
Are you financially secure otherwise?
Do you need it?
If the answer is yes to any of the questions above, the purchase may not be one to avoid. Instead, it may actually bring you happiness. Spending can evoke even higher levels of anxiety for retirees no longer collecting a paycheck. This is one of many reasons why creating a financial plan can bring peace of mind about retirement spending. Working with a financial planner can help you articulate your goals, better understand your ability to spend, and maintain your financial stability. Contact our office today to get started.