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A lot of our financial habits are psychological ones. When it comes to our relationship with spending money, a thing called the objective-subjective wealth relationship is important to understand.
This signifies the link between your financial practices and your financial reality – in other words, what you earn, your savings balance, and the assets you own (objective) versus how much you feel you have (subjective).
For example, one person earning a six-figure salary with $50,000 in savings might feel as though they are one paycheck away from destitution, while another earning $70,000 with credit card debt feels fine.
What’s particularly interesting about objective-subjective wealth, or what journalist Mona Chalabi calls “money dysmorphia,” is how it manifests when times are tough, which is what we’re now seeing play out in real-time on a mass scale.
So often, I hear people say using their emergency fund feels like a failure or like they’ve let themselves down and that all of that hard work is now going to waste. There can also be a visceral sense of dread that if we spend that money now, there’ll be nothing left if something else bad happens down the track.
This is valid to a point, but it shouldn’t have the power to dictate you looking after yourself. Instead, it should guide you to ensure that if you are using your emergency fund, it goes only to the emergencies you set it up for in the first place.
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It’s also easy to feel like you’re the only one having to do this, which can perpetuate that sense of failure, but it’s so important to know that you are not alone and that this is not something to blame yourself for. The forces currently at play are so much bigger than you. Please don’t beat yourself up.
Dipping into savings can also feel like you’re turning your back on your financial goals. But so often when we think about what we want to achieve with our money – I’d estimate about 99 per cent of the time, in fact – we forward-project our aspirations as if getting ahead is the only marker of success. But what’s often lost in this mindset is one of the fundamentals of personal finance: not going backwards.
The uphill battle of getting ahead has never been harder for many Australians. When wages are required to stretch further than ever, there are only so many places a person can cut back. Not going backwards financially, particularly in today’s economic climate, is an achievement in itself and, for many, a goal worth setting, even if it is short-term.
If this is the time when Past You, Present-Day You and Future You meet, give a shout-out of thanks to Past You for all the hard work they did. It means Present-Day You is that little bit safer and more secure than you would be without that emergency fund.
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Future You can use the experience as a learning process and an opportunity to remember what’s important and why your financial goals are what they are. Remember, there is no shame in the game of spending the savings you worked damn hard to attain in the first place.
Victoria Devine is an award-winning retired financial advisor, best-selling author and host of Australia’s No. 1 finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
