Spending Paralysis

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You’ve reached your FIRE goal. You’ve transitioned from the accumulation stage to the spending stage.

Now, instead of growing, your FIRE funds will start to slowly dwindle, hopefully lasting you the rest of your life.

Now that you’re at the point of spending your hard invested/saved funds, you’ll need to bite the bullet and think about how you’re going to spread the investment income across your remaining years.

Money as a tool

This concept harks back to the concept that money is just a tool. It’s not something that should be hoarded for the sake of merely having it.

Saving and investing should always be done for a purpose, or at least with some vague idea of an end goal.

Money is a tool that makes our lives that little bit easier. If you’re investing for the long-term you’re doing so to one day no longer need to work, or to help towards moving to a bigger house, or to fund an extension etc etc.

Without a goal in mind for your savings and investments, then how do you know when you can allow yourself to stop, and god forbid, spend it?

It’s a tricky turn of psychology from what you’ve probably been used to for the last umpteen years. You need to transition your mindset from that of a saver to that of a spender.

And this doesn’t mean you’ll no longer be cautious and rational in your financial behaviour – you won’t suddenly go out and buy luxury items or lavish meals – but it’ll certainly take some doing to subvert your savers mindset.

Spending paralysis

This is certainly something I’ve experienced on a smaller scale than the above suggestions – a games console, new phone, clothes etc. – and can imagine that, after years of investing over multi-decades, it’s a thousand times harder to start spending this money.

Spending paralysis is the act of not wanting to spend the money you’ve saved/invested. For some it could even bleed into a sense of fearing the act of spending the funds you’ve worked hard to build up.

It’s understandable. People can spend years, even decades, accumulating funds. They’ve worked hard to do so, sacrificed time with family, or said “no” to social events either to take on more paid work or avoid spending unnecessarily.

There may even be almost an affection towards this money. It’s grown alongside you; it’s possibly been there from the start of your career to the dizzying corporate heights where you now find yourself.

You may even see it as an extension of you – metaphorical limbs and all.

So how can you possibly start dismembering your money pot; chopping off its limbs piece by piece to serve your needs when all other income streams have ceased? How remorseless and barbaric of you.

5 ideas to prevent spending paralysis

1. Explore the causes of your overthinking

It can often be helpful to try and think of the root cause of the paralysis.

Was it a previous purchase/s you felt was wasted money? Do you look back to a time when money was really tight and want to not spend in order to avoid even getting close to that position again?

If you’re stuck worrying about every purchase, maybe taking a more holistic look at your spending habits, the relationship you have with money and spending, and how those behaviours have been moulded by prior experiences. This could all help towards untangling that uncertainty.

2. Start by making small/menial financial choices

Making big financial decisions is tricky for even the most financially confident and secure individual.

Taking the plunge and relying on your investments/savings is a huge life decision, but it doesn’t have to be made all at once.

Why not gradually move over to that reliance over a period of time to slowly train yourself to be ok with financial self-reliance?

You could start by withdrawing on your investment pot while still in work but only for certain expenses. Then start to add more and more as you get closer to your FIRE date. This means you’ll still be earning, but continually – and slowly – adjusting your mentality to your pot being your main source of income, rather than a wage.

3. Trust your gut

You’ve worked hard to get to this point; you’ve done incredibly well accumulating all these funds and done all the calculations to give yourself the best chance in succeeding in becoming financially independent.

So trust yourself that you know what you’re doing.

Obviously, when it comes to finances, facts and objectivity are a necessity. But life isn’t always as straightforward or as reliable as spreadsheets.

Your head and your gut have got you this far, why stop ignoring it now?

4. Take a break

This is important in every aspect of life, so shouldn’t be ignored from a FIRE standpoint either.

For your own sanity, you can’t spend every waking day thinking about this, and rethinking it over and over again, especially when you’re no closer to coming to a decision.

As someone who has to come up with new ideas continuously for a living, I can assure you taking a complete step away from the dilemma you’re struggling with for a chunk of time can really help when you decide to return to it.

5. What’s the worst that could happen?

And finally, what’s the worst that could happen?

You realise a year or two in that you don’t have enough for 20/30 years of withdrawals? Well then you can just go back to work.

If you’re in a comfortable enough position that you can retire early, I’m sure you have the contacts and CV to just jump back into something without a moment’s thought.

If not, well you’ll have more than enough of a buffer to tide you over while you look for something.

This point is basically me saying “chill”, you’re probably in a better financial position than 99% of us if you’re even close to FIRE or have tried it for a year or two before deciding otherwise.

It’s not always a negative

There’s always two sides of a coin in personal finance.

Spending paralysis may be quite literally paralysing your financial life, but at the very least it’s helping build a cautious mentality towards money.

Too much caution is not a good thing, granted, but at least a cautious person is less likely to get into mountains of debt.

Paralysis instils a mindset in an individual that emergencies should always be covered, insurances should always be utilised, and fees and bad debt should always be avoided as much as possible.

Like with anything, a manageable balance needs to be struck, but at the very least paralysis isn’t going to cause the loan sharks to come knocking at the door.

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