One evening recently, I was reading a book to my kids that, unintentionally, offered valuable money management insights. The plotline is about two squirrels trying to find food to save up for winter. One squirrel spent his year having fun and not bothering to store up anything. The other squirrel was obsessed with storing up any food he could find and had accumulated more food than he would ever need, but still felt like he never had enough. These squirrels illustrate the two ends of the money management spectrum and the problems that people on either end can experience.

The first squirrel represents the “extreme spender.” A person with this money management mindset puts a high priority on using their money to buy things and experiences. This spending can often be very impulsive. A person with this mindset is often not saving enough money for emergencies, leaving them unprepared when financial surprises inevitably come. As their spending continues to grow, so do the required retirement savings to support this spending during retirement. However, since this person typically is not saving enough during their working years, they often find themselves in a very tight spot when retirement comes.

The second squirrel represents the “extreme saver.” A person with this money management mindset is obsessed with saving money, often feeling like they never have enough set aside. With this person, every decision is a money decision. People with this mindset often struggle to spend money and feel stressed and anxious when they spend on something they deem unnecessary.

So, what is the solution for people with either of these mindsets? The interesting thing is that the solution is the same for both: having a well-thought-out and organized cash flow plan that is re-evaluated regularly. This plan should specify the amount of money that is required for non-discretionary spending, and the amount that needs to be set aside to achieve their short and long-term goals. This will help the spender to feel more prepared when emergencies arise and more confident that they are on track to achieve their long-term goals. For the saver, this will help them to feel better about spending money they otherwise may not have, knowing they are saving adequately elsewhere.

Everyone’s life circumstances are different. It can be particularly challenging to understand your own mindset towards money. It is also difficult for most people to develop and execute a financial plan on their own and regularly re-evaluate this plan to be sure it is still effective. This is where the Master’s team comes in! If you, or someone you know, would benefit from this type of intentional planning, please reach out to us!