The Power of Emotional Savings…

A friend of mine loves to golf.  But the expense of it is concerning to his wife so my friend won’t tell his wife when he goes and even leaves his golf clubs with his friend permanently, just so his wife doesn’t see them missing for a day.

I use this example of golfing because it is so common.  It isn’t just the expense, but the time away from work.  It takes me four hours to play a round of golf.  Since my friend is in sales, when he golfs he loses four hours he could have been earning money he can bring home to the family to help get their financial situation under control.

What about a client of mine who loves to get her nails done? She pays to have her nails decorated to match the seasons of the year and will spend as much as $35 for “themed” nails for Halloween and Christmas. And of course she lies to her husband about the cost by saying her friend paints her nails so there’s no cost.  

But is golfing bad or going to the salon such a terrible thing? Of course not! We all need to relax at times and to pay for items that make us feel good about ourselves. The problem is when we have not planned for such expenses. By building a spending plan that includes Emotional Savings you can have the things you want as well as the money you need for necessary expenses. On top of that, you won’t have to lie about these things to your partner!

Along with long-term savings for retirement and emergency savings, build into your spending plan extra “mad money” if you will.  It is inevitable that you will spend this kind of money sometimes, so why not have a plan for it? And be sure to build in this mad money for your spouse as well, not just yourself, even consider doing it for children. In my experience we all need some fun money, regardless of age. We need to know that after all the hard work we do, there will be some kind of reward waiting for us. When you build this kind of money into your spending plan, you will be less likely to go into debt for such items, and will stay on track to save for the future more successfully.

Best of all, this kind of planning makes it possible to have open, honest relationships with the ones you love. You can hold a weekly “Money Huddle” where you discuss finances with your partner without fear or embarrassment and this helps build relationships and brings you closer together. In such meetings you can talk about how the golf game went, for example, or what kind of colors you want to put on your next nail painting. Can you see how this eliminates all the drama?  Emotional spending and weekly money huddles can go a long way to solving financial problems. For help in creating a spending plan with emotional savings built into it visit today.   

What is a 60-20-20 Savings Plan?

Money Mastery teaches its clients the  importance of spending money properly and savings is just another way that you “spend” that must be done properly. I like to point out to my clients that there is no such thing as savings. What does this mean exactly?  Well, ask yourself this question:  You save money for what?  The minute you answer the “FOR WHAT,” part you have spent your money.  It is still in the bank so you call it savings, but isn’t it already tagged, ear-marked, set aside for spending on something? Yes, so that’s why there is no such thing as savings.  So as Money Mastery Principle 3 states: Savings Is Actually “Delayed Spending.”

So what kind of things do we need surplus money for in order to take care of this “delayed spending?”

  1. Emergencies
  2. Emotional spending
  3. Retirement

Emergency Savings

We all have emergencies; they come along once in a while and surprise shutterstock_224050600each of us.  For example, suppose your car transmission breaks, or your hot-water heater leaks, or you have an illness that keeps you from work for a month.  All these are common things that happen all the time.  Look at your associates and see how much this is happening all around you. It’s only a matter of time before some kind of an emergency hits you.

Emotional Needs

And what about impulse purchasing? Just like an emergency, this is bound to happen to you at some point, so why not be prepared for it just like you would an emergency? So many people end up in far more debt than they need to because they do not set aside money that is used purely for the purpose of fun. If you never spend money for the sheer emotional satisfaction of getting something you really want to buy, then responsibly managing your finances becomes a drudgery. It’s like a diet that never allows you to indulge in a cookie or some ice cream once in a while — you will end up feeling too restricted and therefore not stay on the diet. The same is true for emotional spending. We all need to purchase things for shutterstock_44998930 (800x600)ourselves or loved ones on impulse at times, so it’s best to simply be prepared for this when it happens by having money set aside expressly for this purpose. If you don’t, you will spend money earmarked for debt payments or to pay other bills and this causes big trouble down the line.


Of course everyone knows they need to be saving the most money to spend later in life when they have quit working or can no longer work due to health problems. The problem is so many people do not really know how to do this.

The Beauty of the 60-20-20 Savings Plan

The 60-20-20 plan calls for all surplus money to go into these three areas for future spending:

  • 60% for long-term retirement
  • 20% for fun activities that build relationships and ensure you stay on track financially
  •  20% for emergencies.

When a person has money set aside for fun, retirement, and emergencies and an emergency hits then “what is the emergency?”  There isn’t one. And what about when an impulse purchase takes you over momentarily? No problem — you already have money set aside for this specific fun thing so you can spend guilt-free !

How much should you spend into these future accounts?  You should be saving at least 10 percent of your gross income every month for retirement. As for emotional savings, put enough away so that you have money to look forward to a wonderful activity or splurge purchase at least four times a year. In my experience, if you are not having fun very often, life becomes a real drag. As for emergencies, I suggest you review your income and if it is steady and you’ve had no interruptions in pay for the last three years, then save three months of income and be sure it’s liquid, meaning you have it someplace you can get at easily without penalty.  However, if you are self-employed or commission-only, you will need at least six months of income in reserve just to manage properly.

Dream with me for a moment. Let’s suppose you had no consumer debt, with six months of income in the bank. You would not have to be worried at all.  Take this challenge and calculate how much money it will take to get six months income reserved with no consumer debt, then estimate  how many months it will take you to reach this goal. If you want some really easy tools for doing this, I suggest you go here for a low-cost online tool that will help you calculate this quickly and easily.

Where should you keep this money?  This is a big question in terms of retirement money, and I have lots of opinions about that, some of which you can review by reading the following blog posts.  

Here’s How to Plan a Great Retirement

Over the Long Haul the Stock Market Always Goes Up, Right?

Successful Retirement Means You Will Need 8 to 10 Times Your Annual Income

How to Check to See How Good Your Retirement Plan Will Be

Kids’ Snacks and Your Retirement

The Coming Healthcare Crisis for Retirees and What You can Do to Protect Your Retirement Against It

Why You Will Pay More in Taxes at Retirement with a 401(k)

Stop Saving Money Into a 401(k)

Retirement can be funded in so many better ways other than just dumping it into a 401(k) that are so much safer and more predictable that I urge you to contact me for a no-cost conversation: These include real estate, life insurance, annuities, and so forth.  As for emergency and emotional savings, I would keep these funds in the form of cash at home in a safe place, in a safety deposit box, or in a savings account that has a debit card attached to it so you can take care of emergencies when they happen.

How to determine if it truly is an emergency?  If it is totally unexpected, it is probably an emergency.  If the need is urgent, like that it needs to be solved today or at the latest in two to three days, it is probably an emergency.  If you cannot move forward without getting the problem resolved, it is definitely an emergency.  Don’t be afraid of using this emergency money, for this is why you have it.  Just know that 80 percent of all people will have an emergency during this year.  For your peace of mind, you must plan for this happening and relax and know you don’t have to worry.  Go to for more help.   

The First Rule of Finances: Spending is Emotional

This is the first principle of 10 for your review and critique.  As I mentioned in a recent previous post, Financial Principles:  Lighthouses that Will Never Steer You Wrong, I want to expound on 10 financial principles that are absolute and unchanging an that if applied will dramatically change your financial life. “Spending is Emotional” is Principle 1 of the 10 Money Mastery Principles.  

Money Mastery Principle 1:  Spending is Emotional.  This means that money is more about emotions than it is about math. If spending were simply a mathematical problem, more individuals and families would not be consuming more than they should and would be far wealthier than they are. If you do not decide to systematically control your money, you will emotionally consume your future and the opportunities it can offer. Spending money almost always has a powerful emotional impact in our life, whether we realize it or not.

For example, if you just arrived home from a vacation and in your mail found a bill for your auto insurance that you no longer have money to pay, this is an emotional event.  Or how about if you never have surplus money and have to use credit cards so that the balances owed keep growing? This emotional event can put stress on a marriage.

To further illustrate how emotional money can be, take the time to answer the 12 questions that follow. This assessment will help you see how you are (or are not) managing your money, which will be an extremely emotional experience.   Ten points are given for each question, so choose how you are doing on each one for a possible total 120 points.

Once you have taken the assessment, I recommend learning more about how you can get in control of your emotions by learning how to systematically control your spending: contact me for a no-cost consultation,, or sign up for our low-cost online program that will help you start getting in financial control today: Money Mastery Online Program


Why Spending Is So Emotional…

Here is a bad example of spending that will probably cost this family much more than just money because it will take peace from the home and may even cause a divorce.  Consider the following people, I will call the Winkler family — they are a real family of four, consisting of a mother, father, a daughter and a son.  Before I revisit how our conversation went when they had a hot water heater break and flood a portion of their basement I want to review their spending for one month:


The Winkler’s spendable income is $4,000 each month after taxes.  But you will see after line 12 that the $4,000 is gone but they keep spending as they eat out and go to a ballgame. 

The Winklers want to save, but never have any surplus so their savings remains empty as it has been for many months. On line 15 you will see they felt they needed a television and put that on credit.  Then the wife added grandma to the discussion — she is seriously ill with cancer and not expected to live past this year.  They know they will go to her funeral and it will cost $600 in travel expenses, and on and on it goes, long after the $4,000 is gone. Then the hot water heater rusted through and water went everywhere.  They called a plumber and purchased a replacement heater for $850.  Did they have the money?  Not hardly, so they had to use a credit card to pay for it.

As they were sharing this bad luck with me they said, “If it hadn’t been for the hot water heater breaking, we would have been okay financially.” This kind of reasoning is called “delusion.”  The Winklers are over-spending and now it has become a bad habit.

What can be done to break such a habit?  We all know people who make less than $4,000 a month and do quite well.   What can the Winklers do to solve this spending problem?


  • First, they need to have a desire to change.
  • Second, they need a coach, someone to hold them accountable.
  • Third, they need a system that can teach them how to spend their money according to a plan that has been created based on their priorities and values, and then track that plan so they can create a surplus each month.

With desire, a coach, and know-how the Winklers will have a chance at changing.

What if the Winklers end up with even more emergencies, such as a car breaking down, or some kind of medical emergency? How will this affect their self confidence, or relationships at home?  What if the husband gets seriously ill and cannot work for several months, or what if he loses his job?  shutterstock_224050600What if his employer goes out of business?  What might the Winklers say then?  Let me guess:  If it hadn’t been for my company going out of business, we would have been okay financially.”  

I am not trying to be mean-spirited.  You have heard of many people losing their job, only to bounce back and get a better job and higher income.  But hopefully they had reserves to help them during a time of rebuilding because without them, it’s going to be pretty hard to “bounce back.”  The key is to have a surplus before emergencies happen.  

If you have never built a spending plan (this is not the same as a budget), then let me urge you to look into this at  With a spending plan you will be aware of your priorities, values, and spending issues BEFORE emergencies hit so you can be prepared for everything — not just the emergency — but the emotional need to spend money as well — which is also bound to happen.  This kind of spending, like an emergency, will happen at some point, just like the hot water heater breaking, so you might as well be prepared for emotional spending by making a plan for it, too, along with those emergencies. If you do this on a regular basis, you will be much better prepared when a disaster strikes your family AND when you just have to have that trip or new furniture.

Contact me with your questions. I am always available for free consultations:, 801-292-1099.