It’s that lovely time of year when the kids are back in school—yes! Labor Day has come and gone, and It’s the time of year all parents look forward to (except maybe teachers) and the kids mostly dread. The days of camp and sitting in front of The Price of Right with a bowl of cereal are over; I’m probably dating myself with that Gen X joke, but you get the point.
Please don’t think I’m ungrateful for the time spent with my kids, as I know this time is precious. You only get 18 summers with your kids, and after they turn 10, they’ll probably choose biking with friends over hanging out with you. As soon as school begins, suddenly, there’s a feeling of time gained, and hours of the day that would be spent keeping the kids busy/entertained are now available for parents to fill however they please.
There’s a term regarding new money, “nouveau-riche,” which is French-derived and means “new money.” It’s not exactly a friendly term; it suggests that people who don’t come from money don’t understand how to spend it or behave appropriately. It refers to people who have recently acquired significant wealth but may lack the social graces or cultural sophistication to use their money wisely. Think of someone who just won the lottery and decides to buy a round of gold Lamborghinis for their friends and family.
You may be asking why I’m talking about nouveau-riche right now; well, with the new-found time that parents have recently been given by the grace of school systems, we’re all feeling a little nouveau-riche, daydreaming of what we’re going to do with some excess time. This made me recall the questions and behaviors I receive and witness from clients who suddenly come into money or, more commonly, alleviate themselves of long-term debt and now ask what to do with funds that have opened up.
As a family financial planner, I provide guidance on newly received assets and help people maintain a level-headed and confident perspective on what to do with their money, both newly received and long-gestating.
That Nouveau-Riche Feeling – Common Mistakes We All Can Fall Victim To
Most people make some common mistakes when they are given an asset, whether that be the personal time when the kids return to school or an inheritance from a family member who has passed away. The two repeat mistakes I witness many people make are:
- Overindulging
- Overcommitting
Let’s examine these a bit further.
Overindulgence
This one is easy to sympathize with. Just as one has the urge to eat three smash burgers with a chocolate shake after completing a weight loss goal, when funds are released from a commitment, such as childcare or car payment, there’s an urge/inclination to spend it. The “found money is free money” mentality.
I’m guilty of this myself; a quick anecdote: To save $400 renting a tux for a wedding this year, I decided to lose 20 pounds and fit into the one I got married in 14 years ago. I may have gained half of it back at the wedding and spent that $400 I saved thrice over the weekend.
The problem with this is that people tend to spend 2x/3x what that found amount is. If your child has entered kindergarten, and you no longer have to pay for preschool or daycare, that can feel like free money, like time gained back after they return to school.
For example, you recently added another $2k/month into your budget by sending your child to public kindergarten. Before thinking about what fun can be had with the extra cash flow, take a step back and determine if your retirement and college funding are on track. Dedicate money where you feel the least confident first. If both are on track, and there is excess, determine if there are any other goals or NEEDS before the WANTS are addressed.
As I’ve discussed in my previous articles about salaries for the middle class around Boston, there are times when you need to buckle down and get ahead and other times when those pressures are alleviated. Don’t shame yourself for enjoying some financial relief/freedom, but don’t go too far off the deep end, either.
Overcommitment
This tends to be harder to track as it progresses. Unlike overindulgence, it’s not always tangible to understand when someone overcommits the time they’ve recently got back. Parents who regain this time may initially feel a bit giddy and overconfident in what they can devote their energy to. There’s a temptation to spend it all at once—packing their days with everything they’ve missed: quiet coffee mornings, uninterrupted work sessions, indulgent naps, taking up new hobbies, getting back in shape, painting the house, volunteering for the parent association board, dedicating hours as a “room parent” for your child’s kindergarten, and even taking on DIY financial planning tasks. The problem is that when you overcommit, you spread your resources too thin, and everything you want to do becomes a chore; the motivation is gone.
With overcommitment, I like to use the analogy of a fad diet. Sure, you may find some success in week 1, but is it sustainable? Forming good, sustainable financial habits is the only way to enjoy the ride and be confident of the obstacles. Make it a lifestyle, not a fad diet. If you save every penny, you may retire early but be miserable. The journey is as important as the destination.
Balance Is the Key
Hopefully, I’m not bursting too many bubbles here, but when your kids return to school after summer vacation, you don’t free up a whole different life, and you don’t have a cloned self to accomplish everything you want. Also, when a segment of your cash flow is freed up, it doesn’t mean you just won the lottery. Balance is the key to financial stability and financial planning, and one of the pillars of balance is moderation.
If you’re a frequent reader of my articles, you know I always urge people don’t skip the memories, don’t skip the coffees, and spend money on what they love and who they want to be with. You can indulge occasionally if strategies, foundations, and guidance are in place.
I often see people try and do everything themselves to save money, but they ultimately cost themselves too much time they wish they could have back. Being resourceful doesn’t mean you need to avoid asking for help. My #1 priority for my clients is to help them spend more time doing what they love with the people they love, understanding that there’s an opportunity cost to every decision and commitment
With all that being said, I hope you enjoy some new-found time with the kids back in school and get the most out of September, one of our most beautiful and relaxed months of the year in the Greater Boston area.
Please contact me if you’d like to learn more about finding balance and reaching goals on your financial journey. I’m always available, and my door is always open.
P.S. Click the link to get some of my thoughts on how middle-class income in Massachusetts has evolved to what it is like today
