I worked with several clients during Level 4 lockdown who were surprised to discover that despite their reduced income, they were OK.
The lack of spending opportunities created a small windfall for them. This is one of those “I’d-love-to-have-your-problem” problems. And it’s true, having not enough money is definitely worse. That doesn’t mean that ending up with money left over can’t be a problem.
Firstly, not all of the money left over is savings. Some of it is delayed spending. If you stayed home, and didn’t put petrol in the car, that’s windfall money – it’s available to spend on anything. But if the car was due for a service that didn’t happen because of the Lockdown, that’s delayed spending. You still need to get the car serviced, just later than planned. If you have money left over, your first step is to re-visit Clarity, so that you know how big your windfall is, and how much delayed spending you have to catch up on now everything is open.
Clarity will help you to avoid the “Yay-I’ve-Won-Lotto” effect. Not that I expect you’ve got $13million in your account. But I’m sure you know the stories of people who win lotto, and then a short time later, are back in debt again. Lotto and $13million isn’t the only time this effect kicks in. It’s a known thing with larger-than-we-normally-have lumps of money. The actual amount is irrelevant. All of us are inclined to go a bit hazy when presented with more money than we usually have. Freedom! Finally, we don’t need to be careful of our spending, we can shop without worry. We can buy that, and that, and that, and even give some away. And so, it all goes. All of it. More than all of it. Back in debt, again. Sigh.
There are really only three things you can do with your windfall money: save it, pay off debt, or spend it. You don’t have to choose just one of those. Personally, I like the idea of splitting windfall money into three – to take care of your past (debt), present (spend) and future (save). The split doesn’t have to be even. Is it right to throw all of it into early debt repayment? Maybe. Not always. The problem using all your spare money for debt repayment is that if money gets tight again, you’ll have no option but to go back into debt. Psychologically, this “yo-yo debting” can be a killer, leading to “what-the-hell, I’m-terrible-with-money, may-as-well-borrow-even-more-and-give-up-on-ever-being-debt-free” behaviour that puts us even further in the hole. Absolutely, pay back some debt. But make sure you have savings too.
Saving the money is a powerful act of self-care. It says that your needs and wants matter. It’s you putting your own oxygen mask on first, before helping others. If you’re not used to having savings, or prioritising yourself, it will likely feel weird. You may feel strongly compelled to spend it or give it away until you’re back to how things normally are. Breathe. Revisit the self-care step, especially communication. Even if you’re used to having savings, you’ll need the clarity step again. What, precisely, is this money being saved for?
Is it: . To cover a specific cost you know is coming? . A safety net, in case your future income is drastically cut? . To cover the shortfall that you’ve predicted between what you think will come in, and what your bills will be in the future? . The first step towards something big, like a car or a house or a holiday?
It’s tempting to dream of all the things our savings will do for us, the harsh reality is that each dollar can only be spent once. Spend it where you intended to. Be clear that you can cover all your commitments and basic costs before you save it towards a holiday or something similar – it’s so depressing to watch that holiday money vanish because the car needs repairing.
Is it wrong to spend any of it? I don’t think so. If you have clarity, and you’ve practiced self-care and creativity, then this what my mentor calls “Do-No-Harm” spending. That’s the brilliant kind of spending – you know you can totally afford what you’re buying. However much you’re spending, spend it well. Consider the things that have been bothering you for ages. If there’s something in your life that will take money to fix, that’s been like a stone in your shoe every time you think of it or see it, then spend the money there. It may be totally boring, like getting the plumber in to fix something that’s dripping, or finally going to the dentist. I know – you want to spend this fun money on fun stuff! But honest to God, nothing is better than getting that stone out of your shoe.
Stone-free shoes already? Research, plan, anticipate your purchase. The joy of impulse buying fades quickly, often by the time you’ve left the store. Planning your purchase turns it into an experience. Experiences make us happy. For double happiness – plan, research, anticipate and buy an experience.
Triple spending happiness: buy in-line with your values. Your purchase could make a real difference to a small business and/or people in your local community. Is there something you want or need that would also show your support for businesses that match your values? Remember Self-Care. Spending to sooth uncomfortable feelings isn’t the healthiest thing you can do.