The Great Balancing Act: Self Knowledge and Self Budgeting

What is the key to a healthy bank balance? The answer is contained within the question itself, balance. Balance is needed to enjoy a healthy relationship with money (and when I say a ‘healthy’ that’s exactly what I mean, as it is now well documented that financial concerns have a huge effect on our physical well being.)

Achieving this balance doesn’t necessarily involve filling up your savings account, tightening your belt and waiting for a rainy day, just as it doesn’t involve gratuitous indulgence. What’s sought is an ability to enjoy putting money to a responsible use.

Reaching this goal may mean altering your financial behaviours. However, in order to do this you will first require a level of self knowledge. Knowing your own tendencies will allow you to emphasis your positive traits and then level out you natural flaws.

For example, you may recognise yourself as a shopaholic, someone for whom consumption is a form of recreation, a hobby and often a comfort. If so, spending money for you is a thrill and, like any other activity supposed to provide a thrill, it will offer diminishing returns. You will spend more, enjoy it less and less each time and a vicious cycle will develop.

How do you find balance again? On a practical level you need to restrict the opportunities for impulsive shopping. One very easy way of doing this is simply to avoid the shops. However, you will need to face them at some stage. Using a list will help you focus your attention on only getting things you need, rather than browsing everything you could potentially want.

Take other practical steps. Carry cash instead of cards. When your money is there in your hands, in a tangible pile it is harder to hand it over, to feel to bulk of your wallet diminishing as you walk from one store to the next.

Similarly, as a psychological exercise, go out shopping with no money. Browse as your normally would, get worked up about how much you want to buy this or that and observe how by the time you’ve got home again (to where your cards and cash are safely stowed) you’re desire to spend is already dulled.

On a deeper level you need to confront the fact that you are using spending to fill a void in your life. Try and spend your time in other ways, develop new hobbies and if on some level you suspect the spending is a response to some from of inner turmoil, you need to confront it head on.

By the same token some people have an unhealthy obsession with not spending money. Not wanting to waste money is fine, but some are adverse to spending money at all and want to avoid doing so at every opportunity. This is, in some ways, must as mad as showing no fiscal restraint. After all, money has no value in of itself. Not spending it is, in a perverse way, a kind of waste.

If you think this applies to you or someone you know you may have noticed the person in question will sit in the cold, unwilling to turn the heating up, in ragged clothes, unwilling to get a new set, despite being well in the black.

If this is the case your relationship with money is also unhealthy. You need to learn to enjoy wise spending, look at your disposable income and force yourself to spend a sensible amount of it each month. You’ll notice that there are probably areas of your life you’ve needed to invest in for sometime but have put off with no real reason, much to your own detriment.

Paul Greening is a retired financial adviser who enjoys writing on money related subjects that effect ordinary people, from debt management to life insurance cover.