Over her 10-plus years as a Harvard law professor, presidential hopeful Sen. Elizabeth Warren specialized in bankruptcy law and made a study of the economic factors that affect American families. That led to one of the hallmarks of Warren's political career: the creation of the Consumer Financial Protection Bureau in 2010, a watchdog agency that aims to protect American consumers by regulating mortgages, student loans, and other financial products.
Warren has emphasized financial empowerment in other ways, too. With her daughter Amelia Warren Tyagi, a financial consultant with an MBA from the Wharton School at the University of Pennsylvania, she wrote the 2005 book and New York Times bestseller, "All Your Worth: The Ultimate Lifetime Money Plan."
Like many budgeting books, "All Your Worth" outlines steps to take to "transform your finances." But Warren and Tyagi offer a surprising takeaway, too: You can achieve financial stability and still treat yourself. In fact, it's crucial. "You are balancing your money for life, and a critical part of balance is having some money to enjoy," they write. "We're dead serious when we say that if you don't have any money for fun, then you can't afford the rest of your life."
Here's how, and why, the authors say to enjoy your money.
"The key to getting control over your wants is to ignore what you spend your money on, and to focus on how you spend your wants money," the book says.
Since "spending is most fun when you know you can afford it," the first step is calculating how much fun you can afford. Warren and Tyagi suggest this method: Add up your monthly necessities. Put 20% of your take-home pay in savings. The remainder of your paycheck can be used toward fun purchases.
But limiting the amount you spend on fun comes with challenges and can require discipline — and, in some cases, tough love. Warren and Tyagi give a real-person example of a young man named Shane who needed to stop saying yes to every social outing. To help Shane learn to scale back, they told him, "practice saying something we've heard rich people say a thousand times: "I can't afford that."
When Shane's friend suggested a paintball outing, he put his new saying into practice. His friend's response was "I can't either." They ended up staying in, watching sports, and eating pizza. "Apparently Shane wasn't the only one who thought fun was a little more fun when there were some limits," Warren and Tyagi write.
Another important thing to keep in mind, they write, is to spend your fun money on things that bring you joy, not as a way to fill an emotional void.
Warren and Tyagi tell the story of a father named Kevin who endured a messy divorce. Out of guilt, Kevin would overspend on his children. The takeaway from Kevin's actions is "you can't spend your way out of pain," Warren and Tyagi say.
In order to recognize "emotional spending," you have to ask yourself "whether you are really doing what you want — or whether other demons lurk in your spending decisions."
They offer three guidelines to help you curb emotional spending:
- Identify where you're vulnerable. Maybe you spend too much around certain people or in certain situations.
- Protect yourself from temptation. If you have a problem with emotional spending, take away temptation by throwing out your credit cards: "Think of it this way. ... If you were trying to lose weight, you wouldn't carry a family-pack of Twinkies in your backpack."
- Get a little help. You're more likely to change emotional spending habits if you have a circle of support. The simple act of describing your struggles can help put them in perspective.
When you learn to disentangle emotions and money, "You may just find that those sticky emotional situations seem a lot less complicated when you take the money out of it," Warren and Tyagi write.
Warren and Tyagi say that once you've secured a few techniques that work for you, your finances can be a source of power, instead of stress. Warren and Tyagi say there are also accessible remedies: "Your life is like a big, blank canvas, and you can paint it with whatever colors you choose. The picture is yours. So enjoy your money."
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