Know thyself: Are you a spender or a saver

Ok, I know that in the run up to Christmas, not many of us are savers. But honestly, this is an interesting question and one that not many really think about. So, take a minute here and ask yourself honestly, are you a spender or a saver?

Me, I’m a spender through and through. I like spending money – I always have (many of you will know I like a good holiday!).

As a financial adviser, you may not think that I would be a spender. You may assume that it’s always best to be a saver and that those of us advising people on financial planning ‘should’ be savers too. But this doesn’t really get to the core of what effective financial management is about.

Why you need to know

If I’m honest, it doesn’t really matter if you are a spender or a saver. Just because you spend, doesn’t mean you will end up in bad financial situations. And just because you are a saver, doesn’t mean all will be well financially. The key is knowing which one of these you are and acting accordingly.

As I say, I’m a spender. When I was younger, this did cause a few issues. As I have grown up, I have not suddenly become a saver and therefore not run into financial problems. I am still a spender but I now put things in place to make sure I don’t run into trouble.

The most important thing I do is budget. I know exactly how much I spend on the essentials each month – mortgage, utilities, investments, pensions, food etc. I also know exactly how much I earn each month. I put the money I need for my essentials in one account and anything over and above this in another one. My fun account – yes, it is actually called that.

I know that the money in my fun account is for that – for fun. I can spend it confidently and guilt free knowing that everything else is covered. It feels good. I get to enjoy spending that money. I also know that once that account is empty, I have to stop spending. It works

Saver or spender, which is better?

If you are saver, a similar approach could also be useful. In my view, there is always a balance to be had between enjoying life in the now and making sure you have enough to enjoy your future. I have had many conversations with clients about this. It’s not an easy balance to get right. But it is important to recognise that if you are a saver, that you are not sacrificing your life now for a future life may not look how you think it will. Will you really need all that money for when you stop working? Forecasting can certainly help here – so do get in touch if you would like to get to grips with this.

What I am trying to say is simple. Spenders are not any better or any worse than savers. Savers are not any better or worse than spenders. Neither is a better way to live. Neither is more likely to protect you financially than the other. The biggest factor in financial security is knowing which one you are. Know thyself. Are you a spender or a saver?