'Pay yourself first' is what The Motley Fool likes to say. In other words, save for the future. Only then will you find you have the freedom to play!
A few days ago, I wrote a couple of articles about what to do with a windfall -- in part because my husband and I are on the verge of getting a windfall and we're wondering what on Earth we should do with it to secure our financial future. Do we have fun with some of it for a while? Or do we save it?
I have to say that, as we are currently in need of a car to replace the one that recently died on the driveway, I had a 24-hour mental aberration during which time I forgot my usual mantra of 'a car exists only to get you from A to B so don't waste your money on buying an expensive one' and, briefly, indulged myself with the idea of buying a sports car -- just for the fun of it.
Thankfully, I came to my senses because if we spent some of our windfall on flashy things like sports cars, then the windfall would soon disappear and we'd have to continue working our socks off until we accumulated what we would really like for our retirement pot.
In order to bring myself to heel, so to speak, I reminded myself of a phrase that I encountered on one of The Motley Fool discussion boards a few weeks ago which stated: 'Make every penny a prisoner - don't let it go until you have to!'
It's a great phrase. In fact it's pretty similar to the one my mother used to spout at me about how one should 'look after the pennies and the pounds will look after themselves'. The thing is, it's true. And it's probably also true to say that there is a direct correlation between how we handle money in practice and how we deal with it emotionally and psychologically. Studies have borne it out.
Phrases like 'Keeping up with the Joneses' explain why people make financial mistakes. I've been thinking about some of the better money clichés such as:
- A fool and his money are soon parted
- A penny saved is a penny earned
- Penny wise - pound Foolish
For some reason some people seem to think that buying a nice car and spending vast amounts of money on holidays and/or furniture, not to mention their children, will make their lives more worthwhile. I disagree.