“Money Comes Back”: Magical Thinking or Abundant Mindset?

Are you well on your journey towards financial independence, and yet find yourself wanting to go on that once in a lifetime trip, go to that pricey concert, or buy that rare designer item? You’ve been told over and over that you need to be on a strict budget, live on less than you make, and to focus on your needs not your wants. The idea of justifying large purchases can feel taboo and utterly shameful.

"The concept of 'Money comes back' has gained popularity as a recent trend, offering a way for individuals to justify significant purchases without the burden of guilt. It accomplishes this by highlighting the contrast between the scarcity of time and experiences versus the scarcity of money. The underlying thought process is as follows:

Money may come back …

...But being 20 and backpacking on the Italian coast won't.

...But spending time with my kids before they hit their teens won't.

...But attending that Taylor Swift concert with my high school best friends won't.

You get the idea. While money can always be earned later on, time and potential experiences may never come back.

Is this a wise way of approaching your relationship with money? What does psychology say about this?

The Psychology of Abundance vs. Scarcity

In the realm of financial psychology, the dichotomy between abundance and scarcity mindsets plays a pivotal role.

Scarcity

The reality is that our capitalist economic system is based on the principles of scarcity. Understanding that resources are finite helps us allot our time wisely and plan effectively for the future by working, saving, budgeting and investing, while understanding that we cannot spend without limits. On the other hand, excessive focus on a scarcity mindset can often compel individuals to hoard money, live with financial anxiety, and be ruled by constantly deferred gratification. It can be the voice that urges you to pass up on that vacation or new experience because you're afraid of depleting your savings. It’s the part of your brain that says, “Just one more year” each time you consider retiring from work. An extreme scarcity mindset can lead to regrets later on in life, when you reflect on what you missed out by choosing to save instead of experiencing life.

Abundance

The abundance mindset, in contrast, can encourage individuals to view money as a flowing resource with countless opportunities for regeneration. It's the belief that you can spend on experiences that bring joy, personal growth, and lifelong memories without fear that you'll forever sacrifice your financial well-being. It’s the belief that while resources are not infinite, there is enough opportunity for everyone if you find it and a confidence that things will work out. On the other hand, an abundance mindset can easily slip into the territory of what psychologists call “magical thinking.” Magical thinking in this context is the unrealistic belief that money will effortlessly regenerate without the need for sound financial planning or responsible budgeting. It can be the voice that tells you that you don’t have to look at your student loan balance, pay off your credit card bills, or worry about investing for the future.

So What Is The Right Strategy?

1. Prioritize Experiences Over Material Objects: When considering splurges, opt for experiences over material possessions. Research shows that people who spend money on experiences feel happier and less guilty about their purchases. (An exception is when you can turn material objects into experiences that can be “re-lived” with a sense of novelty).

2. Plan your Splurges: To maintain control over your spending, allocate a portion of your budget for periodic, planned splurges. This practice prevents impulsive spending, which can quickly lead to debt. Even if the experiences are positive, uncontrolled debt can lead to a greater sense of regret.

3. Maintain a Budget: Avoid overreliance on the belief that "money comes back" by consistently maintaining a budget. Neglecting fundamental financial responsibilities like paying bills on time, saving for retirement, or maintaining an emergency fund can leave you in a precarious financial situation when unexpected expenses or emergencies arise.

4. Share your Experiences with Others: Ensure that the experiences (or objects) that are chosen are personally meaningful and shareable with loved ones. If possible, capture the experiences through records and documentation so they can be experienced again. However, don’t get caught up in social comparison or having your primary focus that of posting on social media for the sake of others.

Conclusions

In conclusion, the phrase "Money Comes Back" can be a double-edged sword. On one hand, it gives us the green light to live in the moment, which can be liberating. But on the flip side, it can also lead to some financial misadventures if we're not careful. Having an abundance mindset and believing in the regenerating power of resources is a fantastic way to approach life. It encourages us to savour experiences and make the most of every day. However, if we take it to the extreme, it can result in financial recklessness. For those of us who've been sticking to saving, budgeting, and being frugal, it can be quite an exhausting journey. Allowing ourselves to indulge wisely, without feeling guilty, is a vital part of grasping the true meaning of financial independence. It's not just about the money; it's about using your money smartly to gain the freedom to create memories, grow personally, and find happiness that no amount of money can fully capture.