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As a newlywed, Amy Jo Lauber was determined to save enough money for a down payment on a house. Before getting married, she and her husband lived with their respective parents to save. And the couple tried valiantly to use creativity, not credit, to make their first Christmas together fun and inexpensive.
It wasn’t easy…which is how Lauber, now a certified financial planner and president of Lauber Financial Planning, can empathize with her clients. Everybody has an idealized definition of a merry holiday. And when reality fails to conform, spending more than you intended can jerryrig some joy, even if you know you risk derailing next year’s home purchase.
It’s hard to break that pattern – and a real downer during the happiest season of all. But there are ways to have fun spending while sticking with your long term financial priorities.
“You’ve got to get a greater emotional bang out of not spending the money than of spending it. That’s the key,” says Rick Kahler, a certified financial planner who heads the Kahler Financial Group He and Lauber advocate a philosophy of financial planning that blends therapy with planning, with the aim of aligning financial attitudes with actual financial decisions.
The holidays are ground zero for understanding why we spend what we do, even when we contradict the financial priorities we claim are most important. In fact, most first time buyers have to scrimp for a while to accumulate the down payment on their home purchase. According to the National Association of Realtors 2011 Survey of Home Buyers and Sellers, 79% of first-time buyers used savings for that deposit. How did they save? Forty-four percent cut spending on non-essentials; 35% cut spending on entertainment; 28% spent trimmed their clothing purchases; and 14% gave up at least one vacation.
Saving to buy a house is the ultimate exercise in delayed gratification. It can be hard to stay the course, especially when veering from long-term priorities to indulge in holiday spending is more about showing love than giving up on buying a house.
Kahler says that Christmas heightens the emotional meaning we all attach to spending, because the how’s and why’s of giftgiving typically equate to how we express love. “It’s easy to think, ‘We’ve blown the budget, what’s a few more thousand?’ But what’s the belief behind saying that?” he asks. When you find out what that belief is you can reconcile your financial goals with channels of expressing love and commitment. For example, one of Kahler’s clients was overwhelmed by hefty private-school tuition, but refused to consider public school for his children. By parsing why he resisted alternatives to private school, he came to realize that he equated a private school education with the highest level of commitment to his childrens’ future. Once he thought through additional ways that he could invest in his children’s success, he was able to release the unaffordable ideal of keeping them in private school.
“You have to understand why you’re wired that way,” says Kahler. Raw self-discipline isn’t likely to work if it contradicts deep emotional perceptions about what gift-giving means.
The satisfaction of giving gifts comes from the response of the giver. One technique that Kahler recommends is to envision the emotional response you’ll have when you achieve a milestone on your way to buying your house. That might be opening January credit card statements and seeing them near zero, or opening a savings statement to see an extra zero added to the left of the decimal point. “We have to emotionalize the decision to not spend the money, and get equal or greater benefit from not spending it,” he says. A photo of your dream house, posted on your refrigerator or bathroom mirror, can be a daily reminder to achieve the goals that will enable you to buy your house.
If one partner consistently overspends, damaging the couple’s progress towards their big financial goal, it might be time to discuss if that partner actually wants to achieve that goal, says Lauber. ‘Shopping sabotage’ could be that partner’s way of rebelling against a goal that they were pressured into accepting.
“People get swept away with the romance of having their own home. Do you really want to buy a house? It’s a huge commitment,” she asks. “When you understand yourself, you can make more peaceful decisions. “ |
