Broker Check

Keys to Financial Happiness #7

| June 02, 2016

Don’t Go Overboard Spending on Wants until Your Needs Are Covered.

Splurging on an expensive car or a dream vacation can bring a fleeting sense of happiness. However, if you have not made financial arrangements to cover your basic living expenses, a large expense may lead to financial stress that can last much longer than the excitement from spending on luxury items. This can turn a short-term positive experience into a financial weight that must be carried for years.

This principle is especially true when it comes to saving for retirement. Often when people reach the point where they have excess income or receive a financial windfall such as an inheritance, they take a “live for today” approach and spend it on wants, not needs. A key to financial happiness is to do the opposite and avoid spending on wants until your savings are on-track to fund your needs in retirement. Only after current and future financial needs are funded should an individual feel free to allocate money to more extravagant things and experiences.

This is especially true for young people who should focus on establishing a solid financial foundation before spending on more extravagant or luxury items.