How Personal Spending Can Impact Your Business (and your Life)

Perhaps you think you keep your personal and business expenses "separate," just like your accountant instructed you. But consider the real impact of your spending habits. Gain control over your spending or it may sabotage your business.

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  Posted by Terra Paley, Los Angeles, California | Sep 09, 2008

  Good article, thank you!
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  Posted by Robert E. Deeble, MA, LMHC, Seattle, Washington | Sep 09, 2008

  Kathy, as always... well said. That is advice we can all live by. Good to hear from you on Biznik.
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  Posted by Molly Owens, San Francisco, California | Sep 09, 2008

  This is a perspective I hadn't considered before, but it is so true! Owning a business is stressful enough without putting added pressure on yourself with frivolous spending. Thanks for this!
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  Posted by Leslie Sierra, Seattle, Washington | Sep 09, 2008

  very well put! I have a list I will be sending this to :-)
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  Posted by Kate Phillips, Seattle, Washington | Sep 09, 2008

  Thanks for the feedback, everyone. Oh, I wish I was wise enough to have always followed this advice! Mistakes are a very effective way to learn.

  Robert, great to see you on here! Of course you're a BizNik! Robert is awesome and offers art mentoring (I believe private or in group support format) as well as private therapy. He writes brilliant songs, too. Someday maybe he'll let me be his back-up singer. Hey, when is the first annual BizNik talent show!?
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  Posted by Kate Phillips, Seattle, Washington | Sep 09, 2008

  I just heard a story about a man who launched a very successful business venture, he designed a boat that was selling like hotcakes. He "went Hollywood," as my friend described, "new wife, new car, new house," quickly adopting a very spendy lifestyle. The business couldn't support his new lifestyle and he was bankrupt in a short time, in spite of a very successful business strategy.
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  Posted by Brandi L Pierce, Lynnwood, Washington | Sep 09, 2008

  Thanks for the advice! It's hard not to want to spend.. like you said it's been conditioned into us. I will use this article as my reference for "low times." ;)
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  Posted by Audrey L Godwin, Bellevue, Washington | Sep 10, 2008

  Great article! Being one of those accountants who like to see personal and business funds separated (especially for ease of tax preparation), I do speak with clients often about what triggers their spending habits and what beliefs they are holding onto that are no longer serving them.

  Thanks for sharing the wisdome
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  Posted by Margo Wei, Kirkland, Washington | Sep 10, 2008

  Great article. It really makes you think! Thank you.
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  Posted by Kate Phillips, Seattle, Washington | Sep 10, 2008

  Thanks! I can see I hit on something that is resonating. We hear a lot about emotional eating, but rather little about emotional spending. (I guess it's all technically "emotional" spending after we're fed and sheltered.)

  I think the key is to gain awareness as to why we do things. In this culture, it's "normal" to spend, we feel we have to justify NOT spending! But with many things, we act on emotions and justify later with logic (not realizing that's what we're doing).
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  Posted by Kate Phillips, Seattle, Washington | Sep 10, 2008

  PS, Audrey, you sound like a great accountant - very caring, and willing to go beyond the numbers.
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  Posted by Alex Young, London, Surrey United Kingdom | Sep 10, 2008

  This reminds me of the fact that I've never known a rich person who consistently spends a lot. They're famous for being thrifty.
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  Posted by Kate Phillips, Seattle, Washington | Sep 10, 2008

  Yeah, you're absolutely right, Alex, and who wealthy people "really" are, and how they get portrayed in the media (spoiled, indulgent, wasteful...) are two very different things.

  I like to say that the sports, hollywood and pop stars we see in the media are not really "rich" people, they're often just poor or regular folks who happened to have come into a lot of money rather quickly. (And are generally being on their way to being poor again if their 15 minutes of fame runs out.)

  Wealth is more than cash, it's a mindset, an identity. If building long-term wealth is important to a person, spending in the short term won't be.
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  Posted by DeBorah Beatty, Beaverton, Oregon | Sep 11, 2008

  Excellent advice, Kate. I hadn't thought about it in quite this way. I know after some pretty brutal financial setbacks, my husband and I are having a rough time rebuilding just because our personal and business credit are one and the same. We always kept our businesses separate, but the credit agencies don't ee the difference (neither do the collection agencies).

  Keep up the good work.
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  Posted by Sherri Edwards, Seattle, Washington | Sep 11, 2008

  Excellent advice! Thank you!
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  Posted by Jacqueline Brulotte, Gig Harbor, Washington | Sep 11, 2008

  Thanks! What a good read. i am inspired to revisit what I love to do, and make a list to keep by my desk. Jackie
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  Posted by Molly Maloney, Seattle, Washington | Sep 11, 2008

  Thanks for the reminder that "retail therapy" is a coping mechanism that self-perpetuates! I succumb far too often and it almost ALWAYS results in yet more stress.

  Because "help me" is always cheaper than "fix me!"
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  Posted by Susan Evans, Seattle, Washington | Sep 11, 2008

  Great article, Kate. Thanks for sharing your thoughts and ideas with Biznik!
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  Posted by Mary Watts, Emeryville, California | Sep 11, 2008

  Thank you for writing and sharing this excellent article, Kate! This is especially pertinent to businesses in the beginning stages of growth. I look forward to reading more of your insights.
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  Posted by Christien Louviere, Atlanta, Georgia | Sep 11, 2008

  Wonderful piece...I'm constantly trying to separate the two. I ended up hiring an accountant on retainer to clean me up every quarter!
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  Posted by Tanya Barham, Portland, Oregon | Sep 11, 2008

  This has been so hard for me. I feel like I do a pretty good job of curtailing spending. I've purchased a sum total of two outfits and three pairs of shoes in 2.5 years in business. The problem is really my attitude about the frugality. I sometimes see other start-up business owners or business owners who have investment dollars to spend, or credit, I mean how would I know?

  I feel like a frugal depression era grandma in comparison. I know too that being too tight with a penny is no help, either. It can be really hard for me to invest in marketing collateral, time, etc. during slow times to make sure the brand in constantly in the public eye, but I do it because I know it is good for the business.

  I think the key is - like you were saying - to change my attitude from one of resentment at not being able to spend to one of gratitude for being able to do great things for people in a way that I feel has real integrity. AND recently I have started spending something immeasurably more important than money on myself - yep, time. I have been taking time to rent and read books from the library, to sew and to do things that were really hard to accomplish during my first years in business but that I now have a little more time to accomplish.

  Anyway that's my take. Thank you for a great article!
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  Posted by Sue Holm, JD, CFRC, Kenmore, Washington | Sep 11, 2008

  Well said, Kate! I appreciate having new words for this old problem -- one I've dealt with myself, and that I help clients with. It good to have another voice in the choir.
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  Posted by amoreena herbage, Seattle, Washington | Sep 11, 2008

  I just had to add my voice to the chorus of praise for this article...so very true, and something I think most of us struggle with to some degree. It's not the loss of money, so much as the loss of self that comes with giving away moments of your life to the mall when you could be adding precious memories to the personal account of your being. A sunset instead of a new shirt...the smell of the forest in the early morning instead of highlights in your hair... truly inspiring...thanks
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  Posted by Lisa b Hammond, Seattle, Washington | Sep 11, 2008

  Thank you for the inspiration Kate. Please write more!
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  Posted by Elizabeth Rightor MA MEd, Seattle, Washington | Sep 11, 2008

  Kate, I really enjoyed your article. My favorite part was the suggestion about empty space people are trying to fill up when they emotionally spend. Going for a walk around Greenlake in the sunshine ironically is more likely to help someone with their business than buying a latte and burning the midnight oil. Those rituals that spur reflection--and include physical activity to boot--offer inspiration and insight for the next step to take in business or in life. Your article was funny, thoughtful, and inspiring.
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  Posted by Michael Yanakiev, Sofia, Sofia Bulgaria | Sep 11, 2008

  Kate, I am surprised that 'Total Wealth Coaching' can generate through your unique personality so much unconventional wisdom, which definitely lacks in our rather disturbed civilization, which has lost it's common sense, values, faith and orientations.Speaking of Sages, Lao-Tzu asks not without a reason:"Name or body: which is closer? Body or possessions: which means more? Gain or loss: which one hurts? Extreme love exacts a great price. Many possessions entail heavy loss.

  Know what is enough- Abuse nothing. Know when to stop- Harm nothing. This is how to last a long time." Kate, did it ever strike you that :'Life consists mainly of endless human psychosis, whose entire sum equals up to an Absurd, as K.Jaspers will tend to state? I am asking you these questions , since I am deeply convinced that after the collapse of the 'socialist system', capitalism is collapsing also,slowly but surely. Let us not kid ourselves: all the advises given are to create some temporary reassurance,relief, comfort which does not solve the objective problems that stand in front of us:"There is no such thing as free choice and Ideal market mechanism, as it is preached by some 'Wise GAYS' that can predict Nothing, but tend to explain everything!!! "DEMOCRACY stings, but anything else is worse!", Churchill. But for whom dare I ask? What we are essentially doing is scratching the surface, soothing ourselves with rationalizations but we are not solving the problems, since we are part of them! Nobody dares to revise the basics because they are scared out of their minds and resemble somebody ill who has not the moral strength to depart from his illness! Otherwise the big sense of NONSENSE is dancing like a mad man in my head. I feel lonely,underpaid , underestimated, unrealized, frustrated that there is nobody to discuss what interests me and begin to doubt the justification of my existence! I overspend heavily. I want to stay out of mischief but can't help myself! Happiness seems to be a lucky combination of good health and poor memory, and I lack both. I feel sometimes very lonely, with no one to fall in love with, to heal the many wounds that life was so gracious to inflict on me. I hope you feel better.

  But my 'Essential Question ' is: How will you handle the following simple and human report from some subordinate, who trying to get some wealth coaching asks you something of the kind?i

  Dear Boss,

  I have enjoyed working here these past several years. You have paid me very well, given me benefits beyond belief. I have 3-4 months off per year and a pension plan that will pay my salary till the day I die and a health plan that most people can only dream about.

  Despite this I plan to take the next 12-18 months to find a new position. During this time I will show up for work when it is convenient. In addition I fully expect to draw my full salary and all the other perks associated with my current job. Oh yeah, if my search for this new job proves fruitless, I will be back with no loss in pay or status. Before you say anything, remember that you have no choice in the matter. I can and will do this.

  Sincerely,

  Every Senator or Congressman running for President.

  (Try that at your job and tell me how it works out.)
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  Posted by Suzanne Griscom, Seattle, Washington | Sep 11, 2008

  Kate, your timing is impeccable, or perhaps mine is. Just yesterday, as I bought some little happy things, I was thinking about how these little moments of happiness add up to a lot of dollars.

  Emotional spending can also be part of creating patterns in our lives. Something like, "On this day, I have a regular appointment and afterward, I buy a treat at this little shop. The owner recognizes me. We chat. I feel validated."

  Our need to create comfort through artificial or external means (shopping, eating, upgrading) overshadows our need for peace and happiness within ourselves. To the point, in fact, where we dismiss the simple pleasures because they have no bang or bling.

  Yes, we are products of our culture; but more than that, we are products of our advertising culture.

  How many conversations have you had recently that center around a "cool" ad, a TV show, a celebrity, a bargain, what you bought, what you drink, or where you shop?

  How many conversations don't revolve around these topics?

  Wow, you are a breath of fresh air, Kate. Thanks for writing this article. You opened our eyes and gave us permission to let go of our cultural conditioning. We need that reminder every so often.

  Cheers!

  Suzanne
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  Posted by Shawn Hooper, Winston-Salem, North Carolina | Sep 11, 2008

  Excellent article! I’m glad I’m not the only one thinking how much we really NEED, versus what we really WANT. Now I must make sure I don’t swing too far the other direction. (“I can eat McD’s or “splurge” and have real food.”)
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  Posted by Kate Phillips, Seattle, Washington | Sep 12, 2008

  Wow! I've been travelling and offline for a day. (Now I'm competing with a hotel full of people for the one computer, so I'll be brief!)

  I am overwhelmed with gratitude for the contemplation and conversations my article has inspired. I am also relishing the additional wisdom spoken by many here, and the excellent questions being asked.

  Thank-you to each person who has taken the time to add a response. It is not easy to define what things are truly of "worth" in our lives, but it is a worthwhile venture. (And a neverending one!)

  In Gratitude, Kate
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  Posted by Christopher Spelman, Oceanside, New York | Sep 12, 2008

  If people didn't spend the way we do, 3/4 of the businesses wouldn't exist. Do we really need a coffee shop every 1/8 mile, or pharmacy, countless clothing stores and fastfood chains? How about a new cell phone or even a car every year, c'mon! People used to get the most out of products, and even repaired them if necessary because they actually used and needed them. Now we just go get another one, even if the older one is still fine. I do agree with you though, if you don't pay attention and then follow it up with real discipline, you'll be like the folks out there who can't pay the bills, the mortgage, or anything but the reaper! Nothing beats just living life enjoying the beauty mother earth puts in front of us every day. It doesn't pay my mortgage, but it keeps me balanced, and that gets me back to work happier and ready to make the $ that pays the mortgage. Note to Mr. Yanakiev above, cut down on the caffeine friend. And the boss they are making that statement to is We the People!
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  Posted by Michael Yanakiev, Sofia, Sofia Bulgaria | Sep 12, 2008

  Dear Christopher, I read your post carefully, but still fail to understand to a full extend your underlying assumptions! I stare at the virtual blackboard on which you are trying to build a case, but all I see,maybe due to the 'Caffeine' is chalk,chalk and only chalk. It is obvious that being a 'nature boy', you clearly have difficulties to conceptualize more global issues. Take it easy, you are not alone in this complicated matter! 'As time goes this will also pass!'

  I am completely puzzled by the way the world works! Everybody tries to scare you to hell with what is ahead, Alvin Toffler also. One right to feel pessimistic about eastern teachings and wisdom, since the only thing that they really offer is some sort of personal therapy to stay cool and achieve some personal comfort no matter what happens with or against our will! They don't solve objectively anything in principle outside your aura, which is the sad part of the story. But are there objective solutions entirely dependent from us or are we manipulated in a strange way by some unknown trance dental powers that has nothing to do with human moral, values, reasoning,etc.??? A lot of things that happen strike me as impossible for the ' human brain' with all it's limits to consciously conduct, design, invent,etc. What does such a ' crossword ' between 'Business' and 'Nature', like your ' Majesty the E ntrepreneur think on these issues? Christianity with all it's updates is hardly the answer, neither any other religion can deliver the 'missing link', for the time being. But life without any religion can be very dangerous:'Dostoevsky used to state, that once you assume the absence of GOD, anything no matter how disgusting becomes POSSIBLE'. Science and Politics are the main FAILURES of the 20'th Century,that heavily relied on them for solutions.

  Frankly annoyed with our civilization,

      MIKHAIL. 
  

  P.S, It is obvious you didn't get my point nor sensed my strange sense of humor. Therefore i will repeat myself to be more explicit: Let us not kid ourselves: all the advises given are to create some temporary reassurance,relief, comfort which does not solve the objective problems that stand in front of us:"There is no such thing as free choice and Ideal market mechanism, as it is preached by some 'Wise GAYS' that can predict Nothing, Can't Prevent anything, but tend to readily explain everything!!! "DEMOCRACY stings, but anything else is worse!", Churchill. But for whom dare I ask? What we are essentially doing is scratching the surface, soothing ourselves with rationalizations but we are not solving the problems, since we are part of them! Nobody dares to revise the basics because they are scared out of their minds and resemble somebody ill who has fallen in love with his illness and lacks the moral strength to depart from it! It is time for

  some of you to learn the 'Lessons the Brave New World ' is teaching you before it becomes too late! Concerning the people in Washington, I believe based on my knowledge of American culture that the U.S. has a tremendous potential for the realization of radical changes 'on the move'. It clearly needs to redesign some of its major institutions and views to meet the new challenges of the modern world. This can not happen other night and may well take the following 10 years to come. One is for sure -The American intellectuals should not stand isolated in this proses, but take a firm stand and commitment, since the stakes are decisive and we all deserve a better future. As R. Ackoff would say:"The future is not contained in the past."
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  Posted by Neil Tony D'Souza, Ruwi, Muscat Oman | Sep 13, 2008

  "When you're lying on your deathbed, are you going to wish you had spent more time at the office?" - Gotta paste this on my office wall.

  Nice article. Cheers
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  Posted by Michael Yanakiev, Sofia, Sofia Bulgaria | Sep 13, 2008

  Neil, I like that quote of your's and it's worth pasting. I would add two more quotes that you may paste in your office if you like them: "If I could say it, I wouldn't have to dance it."- Isadora Duncan. "I am always doing that which I can't do, in order that I may learn how to do it."-Pablo Picasso.
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  Posted by Michael Yanakiev, Sofia, Sofia Bulgaria | Sep 13, 2008

  Kate, I just read something that sounded so beautiful that I am tempted to share it with our informal community, who enjoy your great article. Mohamed was walking around the market place, when he was approached by a stranger who told him-" You are an ugly son of a bitch!." Mohamed answered-"You are rude, but you are right." Then another man came to him and exclaimed-"You are the beautiful shining sun that shelters us!." "You are right my friend. You see the root of things."- was the answer. A third man ,standing by, heard what was said and asked:" How is it possible that both are right, when stating completely opposite opinions?" Mohamed then said: " I am a mirror polished by GOD. Through me everyone sees himself." I wish everyone a nice weekend and let us do our best to try some of Kate's creative recommendations, Cheers!
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  Posted by Madeline Bailey, Issaquah, Washington | Sep 13, 2008

  It's good to track your personal expenses, so you can "see" what you're spending money on in b&w and decide if it's in line with your income and values.

  I don't separate out all of my accounts. I absolutely serperate out all money for accounting. This works for me because I'm going to account for business and personal stuff, so that I can watch it all. So it's irrelevant if it's separate at the level of my checking and credit card accounts. The IRS doesn't dictate that. They dictate a separation of your accounting. Most business owners do commingle funds, but lack accounting expertise as to how to handle that.

  I personally don't have any problem with my pretty high Starbucks tab, but I feel in control of my spending. I never felt as if I was in control before I started accounting for stuff. Now I can check my assumptions and find out if the cost of a habit is reasonable compared to my income and the value it's bringing to my life.

  Thank you for clarifying that personal worth has no relationship to money. It was really refreshing to see you write it for all the world to see!
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  Posted by Rhonda Ritchie, Spokane, Washington | Sep 15, 2008

  This would be good to remember. Emotional spending sometimes gets us all. Thanks...
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  Posted by maria green, hudson, Ohio | Sep 15, 2008

  Emotional spending starts at home. Parents who are too busy and feel guilty about their absence in their children's lives compensate this by excessive purchasing of unnecessary "stuff for them". What the children want is time with you. So instead of going shopping with them or for them, why don't we just go for that hike/bike together, draw, sing and dance, play a board game, bake, talk, clean the house, play basketball, tennis, golf, volunteer, work in the garden, go to a museum, listen to live music free to the public, etc. And what a great example we will also be for them. Maria
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  Posted by Kate Phillips, Seattle, Washington | Sep 15, 2008

  Madeline, You are right, the IRS does not require accounts to be separate (and I have not always found that it worked for me to do it that way), you only need to separate expenses in your accounting. (But please consult your accountant if anyone has questions - that is not my area of expertise!)

  You may have a high Starbucks tab, someone else may spend their money on Beanie Babies, for someone else, the newest electronics are a "must." None of these things are bad. My point is not that we shouldn't spend money, but that we should spend it intentionally, not emotionally, or out of mere habit. We should understand if we're receiving true "value" for our spending (which only we can determine), or whether the money that equates (quite literally) to our life energy is leaking from our lives like water from a tub with a defective stopper.

  There can very well be a connection between net worth and self-worth, but it is impossible for an outsider to judge. Some people remain underemployed (and/or overspend) because of low self-esteem, and their (lack of) self-worth does impact their net worth. Others intentionally choose lower paying jobs or make other decisions that might make no sense from a financial standpoint because there is something that they value more highly.

  For instance, a gifted teacher might choose to remain in the school system, finding the non-tangible rewards greater than the possibility of doubling their income in a different field. Mother Theresa probably had little net worth, and yet added so much value to others as well as herself through her service.

  A high net worth might be an expression of a high self-worth, or a way to cover up low self worth. I would not say the two are unrelated, not at all, but that net worth and self worth cannot be assumed to be directly equated.

  Maria, you are right, emotional spending starts at home, and infiltrates our parenting patterns and the way our culture does "family."

  Michael, what a beautiful story you shared, yes, we are all mirrors!

  Tanya, you raise a very interesting point when you question your own attitude about frugality (and you sound much more frugal than I am! I am well above the 3 pairs of shoes in 2.5 years example you have set!) We all gravitate to a particular "money style," a natural way that we tend to relate to money. We might be Savers, Spenders, Avoidants, etc. Lately I have been thinking about how that affects our business life as well as our personal life, and perhaps will write an article soon.

  Thanks again to all for reading and responding.
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  Posted by Denise Pyles, Woodinville, Washington | Oct 16, 2008

  Excellent article Kate. Great perspective on finances. I appreciate your insights. Well done!
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  Posted by Kate Phillips, Seattle, Washington | Oct 17, 2008

  Thanks Denise! I see we're cyber-stalking each other on Twitter now... cool! (I'm mskatephillips on Twitter. )
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  Posted by Sierra Kennedy LMP, Seattle, Washington | Dec 09, 2008

  emotional spending?

  never!

  I'm never emotional... well except I really must have my latte.. I just can't live without my late, my coffee, my order out lunch, that scarf, that blet buckle, that pretty file folder, that new car, that membership to the cool club, i need this night out...

  lol, just thought I'd like to play a little.

  It's my way of calling myself out on my own bs.
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  Posted by Chris S, CRPC, Kirkland, Washington | Apr 08, 2009

  After all the great comments above, you don't need my 2 cents. I will say, however, Kate makes some great observations and I really concur with the overall thesis.
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  Posted by Kate Phillips, Seattle, Washington | Apr 25, 2009

  I must confess, I recently copied parts of the last half of this article for a blog post at TheGardenofPlenty.com called Emotional Spending: Buying Love.

  Yes, I plagiarized myself... (just as I had originally plagiarized a part of this article from something I wrote for a course!) I'll try not to sue myself.
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  Posted by David Losh, Seattle, Washington | Aug 03, 2009

  You linked this to the article about the dangers of the IRS. This is exactly what I was looking for from that article.

  Beyond the accounting is a place of responsibility.

  I'm going to spend more time reading this, but wanted to comment that this is worth the time.