There's a little inner voice reminding us that we can't really afford it or that we should be saving up for our retirement. Feelings of guilt come from a combination of things we have learnt or observed in our childhood, our own life experiences and pressure from others. While there are some people who you might call compulsive spenders, there are others at the opposite end of the spectrum who you might call compulsive savers. They are so focussed on saving for the future that they miss out on enjoying life in the present. Such people are usually overly concerned about financial security. They are pessimistic and fearful and prepare themselves for the worst.

So what is the right amount to spend and save? It depends. Ultimately, during your lifetime all your income will probably be spent. It's just a question of whether you spend it now, spend it later, or leave it behind for your children to spend. There is an element of personal choice in deciding how much to spend or save, combined with an element of financial and social responsibility. As good citizens, we all have a responsibility to do our best to take care of our own needs rather than relying on the Government or other people to take care of us. That means setting aside sufficient money to provide for our basic needs in retirement. Saving, though, isn't just about providing for retirement - it's also about accumulating enough money to spend on things that enable us to enjoy life before we retire.

Your income can only be used in three ways. You can spend it now on daily living expenses, spend it in the medium term on things you need to save up for, such as travel, a new car or renovating the house, and you can spend it in the long term in your retirement. If you want to be able to spend money without feeling guilty, you simply need to work out how much of your income you need to set aside to cover each of these three categories and ensure that money is set aside for each on a regular basis.

If you are in a relationship, the balance between each of the areas needs to be a joint decision. This can be a problem when one partner is either a compulsive spender or a compulsive saver. Such people have extreme views about what it means to be financially secure. Compulsive spenders reason that there is little need to worry about the long term. Their strategies for retirement include saving later in life (after all, there is plenty of time left), adjusting their spending habits to live on NZ Superannuation, or, failing that, selling their house for another that costs less. These attitudes and strategies can leave their partner feeling insecure about the long term future. On the other hand, compulsive savers are extremely worried about the long term to the extent that they deny themselves enjoyable experiences in life. They argue that their needs are basic and that they get sufficient enjoyment from life without having to spend money. The problem is that the partner of a compulsive saver is forced to adopt the same frugal lifestyle whether they like it or not (and usually they don't).

If you have a balanced and planned approach to saving and spending which has been agreed with your partner you will be free to spend within the agreed limits without feeling guilty.

Article by Liz Koh
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847.  Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, March, 2008.  For free eBooks, go to http://www.moneymax.co.nz and http://www.moneymaxcoach.com/.

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