How to enjoy your money without regret

Many people work hard to save and invest, yet when it comes to spending, they often feel guilty. For some, every purchase feels like a dent in their financial future. For others, impulsive buying leads to regret the next day. Either way, money becomes a source of stress rather than enjoyment.

Behavioral finance helps explain why. Studies show that people do not always spend rationally. Emotions, habits and mental shortcuts influence our decisions, sometimes leading to happiness and sometimes to regret. By understanding these patterns, we can use our money with less guilt and fewer regrets.

Traditional economics once assumed that people act rationally and that they weigh costs and benefits before making decisions. But research in psychology and behavioral finance shows that reality is far more complex.

Money is more than a way to pay for things. It carries emotions, which explains why people feel outraged when they see politicians misuse public funds on lavish lifestyles. Every choice to spend or save reflects our fears and hopes.

One reason spending feels complicated is what psychologists call anticipated regret.

Studies led by Thomas Gilovich of Cornell University in 1998 on anticipated regret show that people often avoid spending because they imagine regretting it later. They picture a future where they wish they had saved instead.

Ironically, the same thing happens in reverse for impulsive spenders. They focus only on the excitement of buying and forget the regret that may come later. This push and pull is why spending often feels more emotional than logical.

Mental accounting

Another reason is what researchers call mental accounting, a concept popularized by Richard Thaler in 1985. His study, published in the journal Marketing Science, showed that people divide money into separate mental “accounts,” such as essentials, savings and discretionary use.

Take dividends or bonuses as an example. Many people see them as money that is safe to spend, while selling investments feels more like taking money out of your nest egg. The money may be the same, but the psychology is very different.

If money is meant to make life better, then the real question is how we spend it in a way that truly makes us happy.

Back in 2013, behavioral researchers Elizabeth Dunn and Michael Norton explained in their book “Happy Money” that happiness has less to do with how much you spend and more with what you spend it on.

Their research showed that experiences such as a vacation, a family celebration or even a simple day out with friends tend to create deeper and longer lasting joy than material purchases.

A brand new gadget or luxury item might thrill you at first, but the feeling fades quickly while memories often grow more valuable with time.

Meaningful spending

Another study by Cassie Mogilner Holmes of UCLA and her colleagues in 2016 found that spending brings the most satisfaction when it matches personal values.

People who used money to strengthen relationships, pursue growth or support meaningful goals reported higher life satisfaction than those who saved too much or spent without purpose.

What this tells us is simple. Happiness is not about the size of your bank account but about how well your money supports the life you want to live.

Imagine three retirees with the same savings. The first is so worried about running out of money that he barely spends. He skips the trips he dreamed of and avoids hobbies he once wanted to try.

When his health finally slows him down, he realizes the real loss was not the money but the memories he never made.

The second goes the other way. He spends too much on luxuries and drains his savings too fast. By the time he gets older, the lifestyle he once enjoyed becomes impossible to sustain. What remains is stress instead of comfort.

Then there’s the third. She sets aside enough for essentials and long-term security but also reserves a portion for enjoyment. She books trips early, savors the excitement of looking forward to them and creates memories with her family. By striking this balance, she avoids both the regret of holding back too much and the pain of spending too much.

Live without regrets

These examples show what research has been saying all along. Regret usually does not come from spending money, but from spending it without purpose. If you save only out of fear, money does not protect you, it just traps you.

If you spend it carelessly, it leaves you feeling empty. But if you use it for experiences and relationships that truly matter, it gives life more meaning.

The psychology of spending teaches us that financial success is not just about building wealth. It is about using money in ways that create both security and fulfillment.

Research by Gilovich, Thaler, Dunn, Norton and Holmes all point to the same truth that happiness with money is never about the total you keep, but about whether it supports the life you want to live.

Source: Inquirer

Poor Filipinos ‘carefully spend every peso they have’ to survive

The poor, or the bottom 30 percent of the population, spend most of their limited resources on everyday essentials such as food, house rent, and education.

This was pointed out by Dr. Rogelio Alicor Panao, associate professor at the University of the Philippines, who said that latest data on consumer spending “challenges long-held beliefs about Filipino spending habits.”

Panao, in his analysis of the Bangko Sentral ng Pilipinas’ 2021 Consumer Finance Survey, stated that among the bottom 30 percent, almost three-fifths of every peso, or 58.2 percent is swallowed by essential food.

“[This is] proof that survival still dictates daily choices,” he said.

Do the poor squander? BSP spending data upends stereotypes

Even the richest 30 percent and middle 40 percent spend half their resources on food. However, “the gradual drop” – 51 percent and 57 percent – “shows how rising incomes slowly loosen the grip on the dining table.”

“As earnings climb, families channel more to housing, utilities, and transportation, upgrading homes and gaining mobility,” he explained, stressing that the wealthiest spend the most on furnishings and maintenance, a quiet signal of comfort and stability.”

Yet education flips the script: the poorest devote 5.7 percent of their budget to schooling — over twice what the richest spend — suggesting that among the poor more particularly, education is the surest escape from poverty.

“The biggest surprise though appears to be in the pesos spent on life’s little luxuries,” Panao said, pointing out that contrary to the cliché that the poor waste spare pesos on vices, they actually spend the least on non-essential food and alcohol, just 1 and 1.4 percent respectively.

Middle and upper groups indulge more at 1.9 percent and 2.4 percent respectively.

“For policymakers, the message should be clear–make food affordable, housing livable, and education accessible. The poorest are not squanderers—they are disciplined survivors fighting to get through,” he said.

Source: Inquirer

Consumer spending to drive growth this year

Robust household consumption is seen to prop up the economy this year, Fitch Solutions’ unit BMI said, but warned that inflationary pressures and other risks could dampen this outlook.

“We hold a positive outlook for consumer spending in the Philippines in 2025. For 2025, we expect it to be driven mostly by strong economic growth and its feed-through into higher disposable income, as well as a stable labor market,” BMI said in a report.

BMI expects Philippine gross domestic product (GDP) to grow by 6.3% this year and 6.7% in 2026. These projections are within the government’s 6-8% target for both years.

The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% target. 

“A deteriorating external demand will likely be a drag on the Philippines’ GDP. However, the private final consumption expenditure will be positive,” BMI said.

Household spending is seen to accelerate to 5.3% this year, it said. Private consumption, which accounts for about three-fourths of the economy, grew by a lackluster 4.8% in 2024.

Consumer confidence has also shown “upward momentum,” amid the continued recovery from the pandemic, BMI said.

In the central bank’s latest consumer expectations survey, an improvement was seen in consumer confidence for the first quarter of this year and the next 12 months. This, amid a more upbeat outlook on higher income, additional sources of income and more available jobs.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year,” it added.

On the other hand, BMI noted that risks continue to weigh on private consumption, such as prolonged high inflation and weaker remittances.

“These risk factors will adversely affect household purchasing power, while geopolitical tensions have also emerged as a risk that is likely to impact inflation and interest rates.”

“Although inflationary pressures have largely eased in many markets, price levels remain high, and many households have not yet experienced real wage growth sufficient to restore purchasing power to their pre-2022-2024 inflationary shock levels.”

BMI expects inflation to average 3.3% this year, in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast. Headline inflation remained steady at 2.9% in January.

“If nominal income growth does not keep pace with inflation, the purchasing power of consumers will deteriorate, which would be a drag to their spending.”

“Prolonged inflation, particularly in relation to food, will mean that consumers will have to increasingly allocate more of their disposable income towards meeting necessities,” it added.

Meanwhile, the peso is seen to “depreciate slightly” this year and settle at P58 against the dollar.

“Despite the roughly 1.7% depreciation of the peso, this is still a relatively positive outcome compared with the depreciation of 11% seen in 2022 and the 2% seen in 2023.”

“The weaker rate in 2025 is due to the combination of a higher expected consumer price index in the Philippines as well as the US Fed’s hawkish tilt,” it added.

In 2024, the peso weakened by 4.28% to close at P57.845 versus the dollar from its end-2023 finish of P55.37. The local currency sank to the record-low P59-per-dollar level thrice last year.

“While persistent intervention by the BSP in the forex market will help to curb depreciatory pressures on the peso, earlier rate cuts by the BSP relative to the Fed will continue to weigh on the currency.”

“Nevertheless, the relatively stable rate will mean that the Philippines, which remains heavily reliant on imports to meet local demand, will see relative stability in import inflation,” BMI added.

Elevated household debt also poses a risk to consumer confidence, BMI said.

“It not only constrains future borrowing capacity but impacts current disposable income levels. This is particularly true as debt servicing costs rise in response to increases in interest rates.”

“In many markets, central banks rapidly hiked interest rates during the 2022-2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” it said.

From mid-2022 to late 2023, the BSP was the most aggressive central bank in the region as it hiked key rates by 450 basis points (bps) to tame inflation.

The BSP began its easing cycle in August last year, lowering borrowing costs by a total of 75 bps by end-2024. 

“While interest rates will not reach the previous historical lows of the last decade, easing monetary policy will alleviate some debt servicing cost pressures,” BMI said.

Source: Business World