How to Spend Guilt-Free
Finances cause stress in everyone’s life, but a quick adjustment to the way I handled my money helped me feel good about my spending instead of wallowing in perpetual guilt.
Like most college students I used to feel like I was constantly spending too much money. When comparing finances with friends it was clear I was spending much more than them in every category. For years it was dumbfounding to review my statements each month and see how much money I really spent. I would spend $20 here $10 there $5 a couple of times and somehow each month I always had a big purchase I needed to make like paying taxes or dues for a club. Luckily, I had an excellent job in high school and my first year of college (I will be writing more about this soon) so I wasn’t going into debt and still had plenty of money saved and even more invested.
Despite this, I still felt immensely guilty about all the money I was spending. Month after month I would try and cut back on my spending, but no matter how hard I tried I always spent the same amount each month. This went on for years and every time I bought anything I felt guilty and dwelled on my own indulgence buying something I could have gone without. This is a pattern I would repeat for any purchase large or small and it didn’t allow me to enjoy anything I bought for myself. I would agonize over my statements and constantly scroll through transactions online wondering where all my money was going.
This all changed when I read Ramit Sethi’s book I Will Teach You to Be Rich. The title is not the greatest and Ramit will be the first to admit that, but the book is teeming with some of the best financial advice anywhere. The concept from the book that changed my life and the one I’d like to elaborate on here is the idea of “Guilt-Free Spending”. To me, this sounded like an oxymoron when I first heard it.
Thankfully, this concept is simple, effective and completely changed my outlook on money.
Money is a tool. We should use it as such and not allow it to become our master. What this means is controlling how you spend your money and the way you spend your money needs to have a purpose. It needs to make you happy. But, I’m getting ahead of myself.
Before we can spend money guilt-free we have to have a strong financial base. It’s hard to spend guilt-free with no savings and a pile of credit card debt. So let's get back to basics.
- Set up an emergency fund with enough to cover 3–6 months of expenses
- Set up a retirement account of your choice (401k, IRA Roth IRA etc.)
- Set up a high yield savings account from an online bank (I like Wealthfront for its simplicity and lack of fees)
- Set up direct deposit so all your income goes directly to your checking account
I’m sure many of you have most of these accounts set up already which is a great start. One suggestion I will make is taking the extra 10 minutes to create a new savings account from an online bank. It’s easy, the interest rates are insane (2.59% compared to .01% at most banks) and having your savings in a different account makes it just a little more difficult for you to spend it.
Now back to eliminating guilt. The cause of my guilt was trying to limit my spending in all categories. This is nearly impossible. To fix this I made a simple change. I paid myself first and systemized my financial accounts.
I sat down and looked at my monthly income. I set financial goals for myself and set up automatic deposits from my checking account each month for a percentage of my monthly income to my emergency fund, retirement accounts and savings account. I make sure I have enough to cover my fixed costs like rent and transportation and then everything that’s leftover is mine to spend on what I enjoy and what makes me happy.
That’s it. Cover your expenses, feed your savings and retirement accounts and enjoy spending everything else.
For me, that’s going out to eat with my friends or grabbing some drinks with co-workers. For you that may be buying a new pair of shoes or going to see a movie. It doesn’t matter as long as it makes you feel like this little guy.
I also keep a list of more expensive things I want to buy for myself and when I have enough money built up in my savings account I buy what I want knowing that everything is already taken care of financially.
Because I know I have money in case of an emergency, an additional cushion in my saving account and I’m putting away money that’s growing with compound interest for my future I can spend anything that’s leftover and feel great about it. The same way a parent makes sure all their kids are taken care of before they start thinking about themselves, I make sure all my accounts are funded and growing before I buy anything for myself.
This simple change will take an afternoon to implement. It will systemize your financial success for the future. You will be able to spend your money how you want and feel great about it. Time to get to work.
Thanks for reading!
