“You always tell people to save,” a prospective client said. “When can I enjoy life and spend money?”
If you’ve been reading my articles and blogs and listening to my podcast (GoldsteinOnGelt.com) over the years, and if you haven’t been spending any money, let’s consider some options for using your cash.
When to spend
For the basics, food and shelter and the like, you need to cough up some cash every month. Just make sure you live within your means. If you have planned for major expenses and tucked away the money to cover them, go ahead and indulge. Spend lots of money on fancy vacations and fun gadgets if you can fund them from current cash flow (after you pay your bills and deposit into savings) and not need to borrow anything.
When not to spend
If you haven’t fully funded your emergency fund, you need to do that first… before any discretionary outlays. An emergency fund should have three to nine months’ worth of cash instantly available ‘just in case.’
Is someone about to give you a large gift or leave you an inheritance? Resist the urge to spend the money until you’ve got it in hand. And then, confirm that you have paid yourself first before running up more bills. That means you’ve taken care of your basics, your emergency fund is fully funded, and you’ve also put aside money for retirement.
How to spend even more money
People think that budgeting means saying “no” to yourself. Quite the contrary. Knowing your cash flow and long term goals enables you up to spend the maximum amount possible without endangering your fiscal security. Having worked as a financial planner for over twenty-five years, I find that those people who take the time to manage their money enjoy it more than those who neglect planning.
If you reached the stage of life where you are withdrawing money for retirement, read this: profile-financial.com/withdraw-principal
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published March 4, 2015. Updated January 2020