Most of us have likely seen the saying “Spend money on experiences, not things” show up in our social media feeds. The saying is often accompanied by a gratuitous photo of a scenic landscape, or a photo of an individual facing away from the camera while they ‘gaze’ (squint?) into the distance.
This saying is propagated as a holistic living choice. It promotes swapping the purchase of material items for experiences and memories that last a lifetime. The concept is simple: give up clothes, booze, fancy dinners, coffee, car parts (or anything else you can think of) and instead spend a weekend at a luxury hotel in Vegas, take a trip to New York and visit Radio City Hall. There are also the Eat Pray Love options: search for yourself in Bali or relive Leonardo DiCaprio’s The Beach in Thailand. The possibilities are endless, but it doesn’t matter because this philosophy is a bunch of baloney. Here’s why:
The reality is that your financial situation doesn’t improve whether you spend your money on material items or experiences. Swapping one type of spending habit for another does not
translate into smarter financial decision making. Don’t fall into the trap of thinking that your newfound debt and inability to pay bills (let alone save for retirement) is ‘worth it’ because you are making memories that last a lifetime. That is only justification for poor decision making.
This is not to say you must forego all amazing experiences because you need to save for retirement and pay bills. Rather, it is to help you avoid falling into the trap of irresponsible
spending in the name of making memories. If you truly want to travel the world, drastic lifestyle changes may involve renting your home or starting a side hustle to make extra cash. And those weekly dinners and drinks with friends may need to be traded for old fashioned house parties or coffee instead. The key is to make smarter financial decisions by being real about what you can afford and how much you are willing to give up if you want experiences and not things!
Enter the financial plan. A financial advisor is there to help you evaluate how much of your monthly income is available to spend on the things you want—be it material items or
experiences. Your financial advisor can also keep you honest and disciplined when it comes to using debt to finance your purchases: are you the type that can pay off your debt in a
reasonable period of time, or do you get by only making the minimum payment? The answer to this question may determine the viability of maintaining your current spending habits. It also pays to take a snapshot of your financial well-being on a regular basis to determine if you’ve fallen into a habit of living beyond your means. At that point adjustments can be made to your spending to course correct while still enabling you to enjoy experiences or things.
So, go for it. Eat, pray, love. Travel and make memories. Even splurge a little. Just accompany these actions with a dose of honesty, financial discipline, and a budget. And there you have it: a truly holistic financial plan.