How to improve your Financial Fitness!


(And why becoming an extreme saver isn’t the answer. But finding your Sweet Spot is)

​Before you read this post, let’s do a little quiz.

1) Do you feel like the amount of savings and assets you currently hold is low in comparison to the money you earn or have earned over the past 5-10 years?

2) Do you feel like you’ve taken on too much debt over the years and it doesn’t seem to be going away.

3) What about control... do you feel like you lack structure around how you manage and use your money?

4) Are you feeling unprepared for the future?

If you answered YES to any or all of the questions above, you’re not alone! Many of the young couples and parents I work with start out in a similar head-space to this. I believe the main reason for this is because they haven’t found their personal SWEET SPOT for their Financial Planning. What is this ‘Sweet Spot’ you ask? Let me explain.

When talking about money, people often fall into (or subscribe to) one of two camps, the SPENDERS or the SAVERS. To put it simply, spenders focus on the present moment and prioritise short term needs and pleasure over long term benefits. A typical phrase to epitomise the spender mentality is “YOLO – you only live once”. On the other end, savers focus on the future and prioritise long term gains over short term gratification. A typical phrase of the saver camp is “Good things come to those who wait”. But before you think I’m going to tell you to stop spending and start saving, let me say that I think both of these camps have their own pros and cons. I don’t think that being a pure saver is necessarily a great thing – despite what many other financial experts and money books might say. As humans, we are very tribal and so picking a team and sticking with it is a very natural thing to do. But it can also be detrimental because you essentially ignore the merits of the other camp.

Let’s take a look at the arguments for and against each camp.

Spenders

Pros

  • Able to direct all their money towards current lifestyle and experiences. because they have more money available to enjoy more things. (They have fun now!)

  • They “look” like they have achieved financial success because they have the fancier things in life (cars, clothes, holidays, etc)

  • Repeating a common phrase many spenders say – “If you died tomorrow, at least you enjoyed your time while you were here.”

Cons

  • The habit of spending and overspending can become a detrimental habit which can lead to debt issues in the short and long term.

  • Rebutting the common phrase of spenders – “But what if you live a long and healthy life, what will happen in the future if you don’t have enough money saved?”

  • Whilst they may appear to have achieved financial success, in reality, most of what they have is rented (either directly or indirectly via debt).

  • And, if they do become accustomed to spending (or overspending), how will they continue to enjoy life if their expenses keep rising overtime (via habitual spending and increasing debt), but their income starts reducing due to redundancy, global economic changes, health changes, retirement, relationship breakdown, etc. One side of the equation is going up while the other is going down... and not in a good way!

A simple way to think about SPENDERS is that they will likely enjoy the front half of their life, but the back half will be very difficult as their lifestyle diminishes due to their inability to keep bringing in enough income to meet their (usually rising) expenses.

Savers

Pros

  • They don’t waste their money on unnecessary or irrelevant expenses – they only spend money on what’s needed.

  • They learn the skill of delaying gratification and self-discipline which translates positively to other parts of their life.

  • They learn to invest and grow their surplus to provide benefits/passive income in the future.

Cons

  • They delay enjoyment until a set future date, which may or may not eventuate.

  • They restrict their lifestyle and experiences based on cost/money.

  • They develop the habit/anxiety of not spending money on anything other than bare necessities.

  • They reach their desired future point to start spending, but don’t do it or enjoy it because they are attached to saving. They have taught themselves or created an identity where they don’t enjoy spending money. They effectively develop the reverse habit of spenders which can still be negative, if not financially, at least personally or emotionally for themselves or for others they love.

A simple way to think about SAVERS is that they live a restricted front half of their life with the promise to themselves that the back half will be very luxurious and lavish. However, in reality, I rarely see this play out because humans are habitual creatures and 30-40 years of being skimpish doesn’t stop easily. Also, if they do delay their happiness or enjoyment of experiences until a later stage of life, but don’t make it there or do but their health is deteriorated, how much can they truly enjoy it?

From my years of experience as a Financial Adviser, I’ve come to see things a bit differently. I don’t see SPENDERS and SAVERS as two separate camps. I think these “camps” are just two extreme ends of a spectrum. By seeing things in this way, I believe it opens up the ability for people to find a spot on the spectrum where they can get the best (pros) of both worlds, whilst at the same time negating the downsides (cons) of each as well. This my friends, is where the Sweet Spot lives.

Sweet Spot

Pros

  • You take into consideration your short, medium and long-term needs and wants to develop a spending and savings plan that allows you to enjoy your lifestyle today whilst building your wealth for the future, so you can maintain a similar lifestyle over time.

  • The main purpose of this approach is to allow you to enjoy life now and, in the future – financially, personally and emotionally.

Cons

  • You don’t have as much surplus available to splurge (waste) on luxuries in the short term compared to if you didn’t save anything at all.

  • But if you're ticking off the things you want short term and have a plan to tick off other things long term via effective savings, is that really a problem?

  • You may take longer to build your wealth and/or end up with a lower nest egg balance in the long run (because you are not saving as much as you would if you were a fully-fledged SAVER).

  • But if you are enjoying certain luxuries and experiences along the journey, do you really need to be in a rush to get to the “end”?

  • Also, do you need as much of a nest egg if you’re doing those things now rather than putting them off until later?

To illustrate my idea of a spectrum, checkout the "awesome" diagram below.

SPENDER ZONE SWEET SPOT SAVER ZONE

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WHEN IT COMES TO CHANGING YOUR BEHAVIOR AND IMPROVING ANY AREA OF YOUR LIFE, WHEN YOU GET TUNED INTO THE CONCEPT OF THE ‘SWEET SPOT’, YOU’LL START TO NOTICE IT EVERYWHERE. TO BRING THIS TO LIFE A LITTLE FOR YOU, LET ME SHARE WHAT I LEARNT FROM MY PREVIOUS LIFE AS A PERSONAL TRAINER.

Initially when working with Personal Training clients, I got mixed results because I was trying to force people to all follow the same prescriptions. However, over time I found that what worked for one person didn’t necessarily work for the next. That’s because each person had a different set of values, beliefs, goals, personalities and motivations (think lose fat versus build muscle). Eventually what I came to realise was that by helping people find their Sweet Spot with training and dieting, they were much more likely to make the necessary changes and stick to them long enough to progress towards their goals.

For some people this meant we could take an aggressive approach and get fast results, while for others it meant we could take a subtler approach and see progress occur over a longer period but under more sustainable conditions.

Ultimately, I came to believe this was the best approach for helping people make positive changes with their health (and now their wealth) because it allowed them to find what works best for them which meant they would do it as opposed to not do it at all. Doing something that you don’t like/enjoy and then quitting because of that is not much better (if not worse) then not doing anything at all. So, I’d rather people make some improvement by finding their Sweet Spot rather than avoid doing anything because the change required/prescribed is too severe.

(Unfortunately, most money books and experts out their advocate people becoming SAVERS which only perpetuates the negative consequences of this end of the spectrum as well as ostracises SPENDERS from making any improvements with their money because the changes being prescribed are too far away from what they enjoy and want.)

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From my work with many different clients (in Financial Planning and Personal Training), I’ve found this approach to be best because it’s more human in its application. It’s practical, it’s flexible and it can be personalised to suit people’s unique situations.

Everyone has different goals, values, personalities and situations. That means everyone’s SWEET SPOT will be different. The key is to find a spot on the spectrum that best suits you. For some people this will be right in the middle while for others it will be closer to the Spender or Saver ends. Either way, finding your SWEET SPOT is key to developing and implementing a spending and savings plan that will increase the likelihood of you doing what you need to do, to get what you want now, as well as in the future.

Finding your Sweet Spot is the key to finding that balance where life is great now and will be just as good (if not better) tomorrow.

So, if you want to find your SWEET SPOT, what are your next steps? Hopefully this post helps you work out your plan of attack.

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Blake Fitzgerald of Coached Financial Planning (ABN 28 452 214 548) is an Authorised Representative (1236826)

of Financial Force (AFSL 238 337)

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