WEALTH
Spending your way to wellness
By Johan Gouws, Head of PPS Wealth Advisory
When we think about our financial future and having financial security in retirement, one would most likely shift one’ s mind to the discipline of saving and investing. But there is another side of the personal finance coin we need to consider. How we choose to spend our money greatly impacts our level of happiness or contentment, now and in the future. It is an area of financial discipline that does not receive enough attention.
In his book The Art of Spending Money, Morgan Housel suggests that spending money is not a science but an art that needs to be mastered. Whereas science has fixed rules by which order, cause and effect are clearly defined, it is not as simple and predictable when it comes to us and how we manage our finances. The reason for this is that money has an emotional, behavioural and social side to it. Housel views personal finance as more about the personal than the financial. The reason being that our money behaviour is driven by our emotions, which are not hardwired but are learned and developed by our brain as we need them.
Each of us has a different emotional framework shaped by the particular social context( family, culture, friends) we grew up in, and our brains apply our emotions to construct our experiences. Our social context also shapes our individual values and preferences, which originate from our efforts to reconcile our daily needs with our past experiences and what makes us happy. Any discontent we experience arises from when we spend money in a way that does not match our personality.
When looking to develop better spending habits, it is important to understand where the need to always to acquire more money and the things it can buy arises from. In another book – Status Anxiety – Alain de Botton suggests that our desire to rise in the social hierarchy has less to do with the material goods we accrue and more to do with the admiration, respect and attention we can gain from it. To avoid this false
12