Frederic Austin’s “The Twelve Days of Christmas” might not be the ultimate song about spending. Austin didn’t actually gave his true love all those maids, ladies, lords, pipers and drummers.

We are talking 50 people running around. Throw in the animals and there is quite the ruckus. He may have actually bought the rings, but that seems a bit excessive. He sure upped the ante for other folks doing their Christmas shopping in 1909. That is one of the many mistakes we make with spending — we buy things that others have rather than what we really want.

I want to give you some other mistakes that I have seen people make around their spending.

Whenever we save money, we are saving it to either someday spend it or to give it away. There is nothing else to do with it, so that is money’s only purpose. We may say that we are saving to feel secure, but that simply means we will have the money we want to spend when we want to spend it.

A common mistake I see is that people forget what their money’s purpose is and money becomes the end rather than the means to the end. Good savers become terrible spenders and their money is a burden. People worry about the future rather than what they can do today to help craft it.

Addressing this mistake is relatively easy. What you spend today will influence what you spend tomorrow. You will become habituated to your spending so the more you spend now, the more you will need tomorrow. But the more conscious you are of your spending, the less you will spend.

You don’t need to replace your income in retirement, you only need to replace your spending. None of our clients spend less in their retirement, they just spend it differently.

If you are behind in your savings, use any cash-flow changes to ramp it up. When you are no longer helping the kids, save the money that was going to them. When you get a raise, capture that in your 401(k) plan.

And don’t create a budget that is so restrictive that you can’t adhere to it. It is not the coffee shop that costs you, it is the impulsive, online shopping.

The second mistake we see is people paying for things long after they enjoyed them. Spending money on experiences is fabulous, as long as you have the money to spend. If you are using your credit cards to enhance your lifestyle, then you will eventually run into trouble.

Credit is useful for things that may create more value than they cost — a home or education. If you are great at managing credit, it can also help earn you things. I know people who have spreadsheets for credit cards to help them understand how they can effectively use these cards for cash back or travel. But they all pay their balances in full.

Just as there is no easy way to lose that holiday weight, there is no easy way to get off credit. The best way to get out from under this debt is tackling it one credit card at a time. Pick out one card to aggressively pay (usually the highest interest card) and pay the minimum on the others. Once that card is retired, work on the next one.

You are going to feel behind as you do this, but that is because you put yourself behind. Don’t justify this predicament either. You don’t need to judge yourself, but you need to be honest. It doesn’t matter why you got here; it only matters how you can get out and stay out.

The third mistake we observe is people looking at upfront costs and not ongoing costs. Two condominiums with the same purchase price but different homeowner’s association costs are not equally expensive.

If you are looking at used cars and one has warranty left and one doesn’t, they are not equal. If you are paying for a private school, understand the expected annual donation in addition to tuition. It’s often the recurring costs that get you.

Inertia is another mistake we often see. When was the last time you put your homeowner’s or car insurance out for bid? Those year-end charitable requests that ask you to slightly increase your gift from last year — what if instead you stopped to think how you are directing your charitable donations and be sure that they are consistent with your values. Have you called the cable company to see how you can reduce your monthly costs without sacrificing service?

Another mistake is thinking that when you retire you should only live off the dividends and interest from your investments. That approach forces you to be more conservative than it is wise to be because you have to buy “safer” investments.

For most people who are retired, there are two obstacles: volatility and inflation. Volatility is short-term, inflation is long-term. You need to protect yourself from both by managing your cash and investing in growth.

If you change your tune about spending, you will end up with far more than what money can buy.


Ross Levin is the chief executive and founder of Accredited Investors Wealth Management in Edina.