When we receive a lump sum of money, whether it’s a gift, an inheritance, the sale of a business product, or even our salary, it’s always exciting. The new money gives us a chemical rush, dopamine, and a boost of vitality. All of a sudden, we are in a good mood and we are smiling at everyone. That state of euphoria brings up so many thoughts. Thoughts start to surface about what we can do with money. Paying off debt, a nice burger, a celebratory visit to the bar, clearing your junior cards, a phone upgrade, and buying that washing machine you’ve been dreaming about. Then maybe you think of covering your needs, food, transport, housing, etc.
Some of these ideas are outlandish, others are perfectly reasonable, but most of us experience a mix of both. It’s the perfect storm for impulse buying. You’re going to be thinking about all the things that you need to buy, things that you put off buying, and your dream purchases. It’s buy, buy, and buy. In the first few days of getting paid, the most impulsive spenders will have spent it all. That is excluding low earners, by the way.
They will have spent it all, mostly on impulse purchases. Something funny happens sometimes where, after the money has been exhausted, the spender suddenly remembers something important that they were supposed to pay for that they need. Something they told themselves that when they have money, they will pay for. But of course, in the heat of spending, forgot about it.
In other cases, people get paid and want to celebrate the arrival of the money, so they go out and end up spending up to a quarter of the money, just on celebrating. The joy of getting paid can fool us into overspending. In that state, if someone asks you for money to borrow or as a gift, you are more primed to say yes. The truth is that we are all at risk of this effect because joy is a universal emotion. What if there were a way to cut out the psychological impulse of overspending after getting paid?
Using Time as a Tool for Restraint
Time is the best defense. It creates a psychological buffer between your money and your impulses. It protects you from yourself and people who may try to take advantage of the fact that you have come into money. Time helps you shed off the fantasy and separate the wheat from the chaff. As a general rule, the larger the amount, the more time you should give yourself before deciding what to do with it.
But of course, large is relative. To a secondary school student, 100,000 Naira may feel huge. To a middle-class adult, it may not. But maybe 10 million Naira would. It all depends on what one is used to. Context matters, but the principle is the same.
For regular salary income, 3-5 days may be enough time. But the money from the sale of a property or inheritance might be large enough that an appropriate waiting period of 1-6 months could be wiser.
I once shared how, when I started earning in dollars, I lived on a small portion (the equivalent of about ₦200,000 at the time) and left the rest untouched in my dollar savings account. For over two years, more than 90% of my pay just sat in the account. Biding my time and just trying to figure out what to do with the money. Not minding inflation. The way I looked at it, I figured it was better for inflation to eat at the money slowly than to lose it all in a scam or bad investment.
In the early stages of your waiting period, your brain will come up with all sorts of urges, fantasies, and suggestions on how to blow all your money. Splurging on luxuries, “treating yourself cos you deserve it”. You would consider being overly generous with friends, romantic partners, and family members.
But as time passes, the earlier impulses you came up with will fade, and more practical thinking starts to surface. The reason for this is simply because the initial excitement of receiving that money is starting to fade. The more days that money is with you untouched, the less emotional you will be about it because it is no longer a shock to your system like it was in the first few moments of getting the credit alert. It is now becoming a part of your boring everyday life. And with boredom comes practical thinking.
What To Do While Waiting
The waiting period isn’t about doing nothing. Here are a few ways to use it well:
Keep Quiet
Since the whole point of a time buffer is to help restrain your spending and make better decisions with your money, I believe it’s best to keep shut about your windfall. Of course, it may not always be practical to hide things from your spouse or trusted confidants like your parents.
In other cases, depending on their personality types, you may need to hide it until you are firm in knowing what to do with the money. Keeping quiet is important because if you broadcast your windfall, you are going to, all of a sudden, attract “urgent” financial requests that only you can help solve. This will put undue pressure on you to spend money before you are ready.
Celebrate
But not in the way you think. In fact, I don’t recommend using the money to celebrate if you can help it, because that is a slippery slope. Some ideas: buy a moderately priced wine, go see a movie at the cinema, make yourself a nice home-cooked meal, or try a foreign recipe for a meal you’ve always liked or wanted to eat (creamy pasta, burger, party jollof, fried rice). So celebrate, but not by splurging or blowing half of the money at a party or on a shopping spree.
Create Your Master List
To relieve yourself temporarily of the impulses, create an exhaustive list of everything you feel like buying. From the most ridiculous things to the most reasonable needs. Add whatever you feel like to that list, don’t censor yourself. This helps to get the list off your head and onto paper so as to relieve you of some of the pressure of thinking about them. Over time, you will find that most of the items on the list are either silly or not as urgent as you thought.
Track your Existing Expenses
This will help you suss out recurring non-negotiable needs on a month-to-month basis, so you can separate properly between your needs and wants. You can plan ahead for the money you have received surgically. Tracking expenses is something that is very useful for knowing where your money goes, where you are leaking money, and could cut the fat. So, if you are going to be spending the new money that has come to your life, you want to make sure that you are not going to be spending money on things that you actually don’t need.
Budget
Depending on what you have planned to use the money for, budgeting is critical. For instance, with a salary, you’d want to budget for your needs for that month. Your savings, your wants, and investments.
If it’s for a business, you want to create a priority budget list of the most important items you want to buy. This is where tracking your expenses would especially help you, because it helps you know how much you spent in the past on similar items, so you can use that in planning your budget.
Studying and Research
In the two-plus years that I had saved approximately 90% of my salary, I read tons of books and materials on personal finance and investing. For large sums of money that have the potential to be life-changing, you do not want to rush the process. I can’t stress this enough.
Read books on business, investing, and finance. Read blogs like Mindful Naira and participate in finance forums. Stand on the shoulders of the giants who have come before you. You have to look before you leap so that when you do leap, you can do it with confidence.
The Bottom Line
Restraint isn’t about denying yourself forever. It’s about giving your brain time to calm down and letting the crazy spending ideas burn out. Time dulls the edges of your emotional impulses. Remember, the larger the amount, the longer you should wait. That’s how you turn lump sums into lasting value.