How to go From a Saving Mindset to a Spending Mindset

Our topic on this episode of the Ready for Retirement podcast is about how to go from a saving mindset to a spending mindset.

Questions answered: What amount should I feel comfortable spending in retirement?  What can I do to shift anxiety that comes from no longer receiving a consistent paycheck? What strategies can I implement to improve my financial future? What is the best approach for my individual situation? 

Are you ready to start focusing on the things that truly matter when it comes to your financial future?

Key Points

• Financial planning is about understanding who we are and how we can use the resources we’ve created to create the life we want to live.
  • How do I shift from a saving mindset to a spending mindset?
    • The people that have done really well to save and invest are generally the savers. 
    • Savings becomes a part of your identity and it’s difficult to make a sudden switch to spending and not saving, even if you have the means to do so.
    • On the flip side, individuals who have no issue spending tend to have less capital in retirement and have to try to save, which is equally, if not more so, as difficult.
• Two Ways of Thinking
  • Habits
    • James Clear is an author who wrote “Atomic Habits” and it is one of my favorite books.
      • “The key to building lasting habits is about focusing on creating a new identity first. Your current behaviors are simply a reflection of your current identity. What you do now is a mirror image of the type of person you believe you are, either consciously or unconsciously. To change your behavior for good, you need to start believing new things about yourself. You need to build identity-based habits”.
      • “The first layer is changing your outcomes. This level is concerned with changing your results: losing weight, publishing a book, winning a championship. The second layer is changing your process, this level is concerned with changing your habits & systems: developing a meditation practice, decluttering your desk for better workflow, implementing a new routine at the gym. The third and deepest layer is changing your identity, this level is concerned with changing your beliefs, judgement about yourself and others, your self-image. Outcomes are about what you get, processes are about what you do, identity is about what you believe.”
    • Questions
      • Do you want to save more?
      • Do you want to spend more?
        • Once you’ve saved and run financial planning projections to prove you have more than enough and understand you’re in a comfortable position to achieve your financial goals, you can begin to change your identity.
• Three Circles Exercise – The Golden Circles
  • Imagine three circles in the middle, with the smallest in the middle, a medium-sized circle around that, and a large circle with the two smaller circles within it. 
    • Simon Sinek describes this in “Find Your Why”.
      • In the middle is the “Why”, then there is a “How”, and the “What” is what you see on the outside.
• Financial Framework
  • The listener’s goal is to give himself permission to enjoy what he has and spend the means he’s created.
    • The outside layer is the outcome that he wants – this is a spending mindset and peace of mind.
    • The inner layer is the process to do it. 
      • Can we implement a system or routine to reach this outcome?
      • What are the things you want to spend on?
      • Let’s assume it’s eating out at a nice restaurant. Eating out at a nice restaurant may be difficult at first and something you’re not used to.
        • This may mean spending more money than you’re comfortable with once a week at a restaurant with the goal of making you more comfortable spending more money.
        • This will change your identity from someone focused on saving, but that savings identity is no longer helping you in retirement.
• Consistent Action
  • James Clear explains further, “Every action you take is a vote for the type of person you wish to become, no single instance will transform your beliefs, but as the votes build up, so does the evidence of your new identity.”
    • Every time you go to a restaurant and spend the resources you’ve done a great job saving to accumulate, you’re voting for the person you hope to become.
• Personal Story
  • I recall being very frugal prior to my marriage and having to determine how I can shift my mindset from a savings mindset to a spending mindset. 
    • I wanted to make sure I was in a financial position to accomplish our goals, but my wife helped push me to realize that a spending mindset doesn’t have to make you feel guilt or anxiety and that you deserve to spend money on the things / experiences that are most important to you. 
• Overview
  • It’s about being intentional and using your finances to fulfill what’s ultimately most important to you.