The market has been on a tear lately. The DOW Jones Industrial average is close to new highs as well as the S&P 500. As most of my readers know, I have a lot of money tied to the market. Most are in retirement accounts, but some are in investment accounts. My net worth has grown significantly over the past several months. Because of that, I have noticed that I tend to not care so much about spending. This is a negative consequence to an otherwise positive stock market.
We recently shopped at Target. I used to hesitate spending more than $100, but now it doesn’t faze me. We recently shopped for clothes online and spent a few hundred there. Additionally, we spent thousands on some furniture and other home accents. It didn’t bother me. Five years ago, all of these expenses would’ve made me cringe.
Here is the problem with the way I am currently managing my money. My money is unrealized. It is money that is tied to the market in the form of a mutual fund or in real estate. Unless I sell my investments for actual dollars, they will continue to fluctuate in value. What is worse is if and when the market tanks again. When that does happen, I know I’m going to reign in the spending. I’ve seen it time and time again in my situation, but I’ve also seen it in others. When real estate was hot, everyone was refinancing their homes to pay for cars and vacations. When the tech rally occurred in the late 90’s, I had friends sell stock to purchase jewelry. It’s human nature to spend more than we should when we are under the illusion that we have money, but it’s just that…an illusion. You actually don’t have the money until you sell your investment.
I realize my own problem and continue to struggle with trying to correct it, but it’s challenging. When you look at my own net worth, it’s hard not to think you have money, but in actuality, it’s not real. Most of that net worth could be erased in a single day or week with a weak economy.
Do you tend to not look at money differently when you think you have more of it?
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