If you think that you need to save only for retirement and emergencies, you need to think again. The need for a third savings category in your Spending Plan is vital if you are going to stay on top of spending and get out of debt. This third category is called “Emotional Savings” and it can do wonders for your finances as well as your general sense of happiness.
What are Emotional Savings?
It goes without saying that we will often spend money for purely emotional reasons. This, in and of itself, is not a bad thing. It is simply something we should plan for, especially in today’s product-oriented society where we are often enticed to make impulse purchases. People spend money whether they have it or not so saving money for this emotional spending just makes sense. It takes into consideration that there are many times we need to spend for reasons that go beyond daily survival and preparing for the future. Simply saving for retirement will not be enough when an emotional event occurs right now. You must put aside even more money in an “emotional savings account” so that you will be prepared when these events arise, because they are sure to happen!
Think on this: You can have anything you want, you just can’t have everything you want, so that means you must prioritize your spending so that you can fulfill your emotional needs without jeopardizing your future or derailing your efforts to get out of debt. The way to do this is to prepare a Spending Plan, track your spending according to that plan, and then see where you have been wasting money. You can take this wasted money and create the three spending categories, 1) Emergency Savings, 2) Long-term (or retirement) Savings , and 3) Emotional Savings.
You might be thinking, “but what if I don’t have much I can put away for emotional savings?” That’s okay, the Money Mastery program likes to recommend finding even just a little bit you can save, say 1 percent of your gross monthly income (which we guarantee you WILL find if you make a Spending Plan and track the plan).
Okay, so what are some of the emotional needs for which you should be saving? Typically these could include such things as:
- New recreational vehicles
- Clothing for special ocassions
- Novelty decor for your home
- New music or collecting more books for your library
- Treating family members to a surprise gift or getaway
- Spa retreats
Whatever the money is used for, it is important that it be spent on something fun and not for routine, daily sustenance. If you are married, emotional money should be spent on you and/or your family and not someone outside your household.
Wouldn’t it be wonderful if you could meet your emotional needs when you just want to buy that new CD or you see a handbag that you would love to get that goes with a pair of shoes you’ve had in your closet forever? What about not having to feel guilty when you want to buy more flowers to plant in your garden in the spring time or when you want to treat your husband to a golf trip with his buddies? Wouldn’t it make you feel sensational to spend money for these wants when you’ve actually put money aside expressly for this purpose?
Preparing for the need to spend money for purely emotional reasons eliminates the following negative habits:
- Reckless spending of money that has been set aside for daily survival.
- Frittering away your long-term savings needed for retirement.
- Staying in debt much longer than is needed because you are spending impulsively.
Emotional savings brings wonderful psychological rewards into your life and the lives of your family members, especially for those who don’t overspend but constantly deprive themselves and their family members of those things that would help build lasting family memories and close emotional ties to loved ones. Emotional Savings can be a lifesaver! It gives people exhausted by the daily struggle for survival a legitimized excuse to play, relax, and enjoy themselves a little when they would not otherwise feel justified in doing so.
The only time it is not appropriate to spend money for emotional wants is when you have not allocated funds expressly for that purpose within a well balanced Spending Plan where those funds have been planned out to be used for such spending. If you have this money accounted for in your Spending Plan and are putting it in savings each month (regardless of how small that amount may be), it is totally acceptable to spend this money for the sheer purpose of providing pleasure to you and your loved ones. Doing so will give you a sense of peace and satisfaction and eliminate the guilty feelings that come from spending money on emotional impulse when you have not planned adequately to do so.
Contact us at Money Mastery for more information about Spending Plans and creating savings categories within that plan.