Consider This Your Permission to Spend More Money in 2022

Here’s a prescription for money happiness in 2022: Accept the fact that you’ll likely spend more money than you did in 2021.

With inflation driving up the cost of food, rent and more, pressures are mounting on our wallets, so expecting your spending to stay in line with the past year is both unrealistic and a recipe for feeling guilt and self-recrimination. The key, financial planners and researchers say, is thinking ahead about where that extra spending will happen and quieting the voice in your head comparing your expenses from one year to the next.

“What’s going on right now that is so crazy is that no one even has an idea of what the baseline should be. The past may or may not be relevant to the future,” said Abigail Sussman, associate professor of marketing at the University of Chicago who studies how consumers make judgments.

Financial experts advise that future budgets allot more to needs, such as higher rent, as well as wants, such as travel. Here are some ways to do just that.

Keep on Saving

You may have saved a lot of money in the past year, thanks to a strong labor market, rising wages and record-high savings rates. You can save more in 2022.

Adding more to your existing savings can calm a lot of fears people may have about spending more money in other expense categories, said Sarah Behr, financial planner and founder of Simplify Financial in San Francisco. As you’re watching that savings account grow, you can relax knowing that should catastrophe strike, you have a cushion.

Check in on your savings progress from the previous year. Are you happy with the amount you set aside? Do you want to increase your savings rate or maintain the current one? Even as you expand your budget, save first before spending on other things. You can set up regularly scheduled withdrawals to automate the process and eliminate stressful decisions.

Stop Thinking in Dollars

Having frugal habits helps ward off lifestyle creep. Yet you may be hanging on to outdated ideas about how many dollars to spend in different areas of life. The past two years may have reduced your spending on travel, going out and entertainment, but those circumstances aren’t permanent.

Spending more money than you have previously can lead to feelings of shame or embarrassment, Ms. Behr said. She’s previously talked to clients who have moved up from meagre means and struggled to adjust to the new latitude more money affords them.

“I’m the one saying, ‘Whoa, whoa, whoa, you can afford to go out to eat, you can afford a new car, you don’t have to drive your 2015 Prius,’” Ms. Behr said. “[Clients] are saving, and they’re squirrelling away, but there’s no change in perspective.”

Malik Lee, a managing principal and adviser at Felton & Peel Wealth Management Inc., recommends looking at budgets in terms of percentages of your overall income, rather than dollar amounts.

He points to the 20-30-50 model, a tenet of personal finance that encourages putting at least 20% of your take-home pay into savings; allotting 30% for “wants” like travel and socializing; and designating the final 50% to fixed expenses such as housing and bills.

“Thinking in percentages of income makes this a lot easier, and it makes it flexible,” Mr. Lee said. “As you’re increasing your income, that will ensure that your savings will increase with that, and the other ‘good’ categories will increase, too.”

Pick Your Splurges

Most of us have practice downsizing budgets and cutting expenses. Fewer of us have spent time planning what we’ll spend more on, especially in terms of luxuries like travel or entertainment, what Ms. Sussman refers to as “pre-committing to indulgence.”

This doesn’t mean splashing out on everything, but thinking carefully about the spending that will have the most positive impact, such as setting aside money for a long-awaited vacation.

Instead, consider the spending that brings you the most satisfaction, such as vacations, home-fitness equipment or some other priority. Allotting more money to items like those can make your budget feel rewarding, Ms. Sussman said, so that when you’re making trade-offs in other areas of your life—like cutting back on going-out expenses to put more toward your new, bigger apartment—it feels less like a loss and more like a pivot.

Allot money to those savings goals—“I’ll spend more on travel in 2022” or “I want to save for a bigger apartment”—by creating a separate bucket for these funds. Name it something fun in your preferred budgeting app or spreadsheet. This way, as you’re watching the money grow in the account, you can sprinkle some extra anticipation on the future fulfilment.

Last, a Piece of Advice

Whichever budget works best for you, Ms. Behr warns against measuring your own spending or saving against peers’.

“A lot of people ask me, ‘Do we spend too much money?’ or ‘How much do other people spend?’” she said. Worrying about spending is natural, but comparing the size of your savings with others is often unproductive, she added. “It’s like that old saying: ‘Comparison is the thief of joy.’”

An original watercolour illustration for the cover of Harry Potter and the Philosopher’s Stone, 1997 — the first book in J.K. Rowling’s hit series—could sell for US$600,000 at a Sotheby’s auction this summer.

The illustration is headlining a June 26 sale in New York that will also feature big-ticket items from the collection of the late Dr. Rodney P. Swantko, a surgeon and collector from Indiana, including manuscripts by poet Edgar Allan Poe and Arthur Conan Doyle, author of the Sherlock Holmes books

The Harry Potter illustration, which introduced the young wizard character to the world, is expected to sell for between US$400,000 to US$600,000, which would make it the highest-priced item ever sold related to the Harry Potter world. This is the second time the illustration has been sold, however—it was on the auction block at Sotheby’s in London in 2001, where it achieved £85,750 (US$107,316).

The artist of the illustration, Thomas Taylor, was 23 years old at the time and a graduate student working at a children’s bookshop. According to Sotheby’s, Taylor took a “professional commission from an unknown author to visualise a unique wizarding world,” Sotheby’s said in a news release. He depicted Harry Potter boarding the train to Hogwarts on platform9 ¾ platform, and the illustration became the “universal image” of the Harry Potter series, Sotheby’s said.

“It is exciting to see the painting that marks the very start of my career, decades later and as bright as ever! It takes me back to the experience of reading Harry Potter for the first time—one of the first people in the world to do so—and the process of creating what is now an iconic image,” Taylor said in the release.

Meanwhile, to commemorate the 175th anniversary of Edgar Allan Poe’s For Annie , 1849, Sotheby’s recently reunited the autographed manuscript of the poem with the author’s home, Poe Cottage, in the Bronx.

The cottage is where the author lived with his wife, Virginia, and mother-in-law, Maria Clemm, from 1846 until he died in 1849. The manuscript, also from the Swantko collection, will remain at the home until it is offered at auction at Sotheby’s on June 26 with an estimate between US$400,000 and US$600,000.

The autographed manuscript will remain at Poe Cottage until it is offered at auction at Sotheby’s on June 26.
Matthew Borowick for Sotheby’s

Poe Cottage, preserved and overseen by the Bronx County Historical Society, is home to many of the author’s famous works, including Eureka , 1948, and Annabel Lee , 1927.

“To reunite the For Annie manuscript with the Poe Cottage nearly two centuries after it was first composed brought to life literary history for a truly special and unique occasion,” Richard Austin , Sotheby’s Global Head of Books & Manuscripts, said in a news release.

For Annie was one of Poe’s most important compositions, and was addressed to Nancy “Annie” L. Richmond, one of the several women Poe pursued after his wife Viriginia’s death from tuberculosis in 1847.

In a letter to Richmond herself, Poe proclaimed For Annie was his best work: “I think the lines For Annie much the best I have ever written.”

The poem was composed in 1849, only months before Poe’s death, Sotheby’s said in the piece, Poe highlights the romantic comfort he feels from a woman named Annie while simultaneously grappling with the darkness of death, with lines like “And the fever called ‘living’ is conquered at last.”

Poe Cottage, preserved and overseen by the Bronx County Historical Society, is home to many of the author’s famous works, including Eureka, 1948, and Annabel Lee,, 1927.
Matthew Borowick for Sotheby’s

In the margins of the manuscript are the original handwritten instructions by Nathaniel P. Willis, co-editor of the New York Home Journal, where Poe published other poems such as The Raven and submitted For Annie on April 20, 1849.

Willis added Poe’s name in the top right and instructions about printing and presenting the poem on the side. The poem was also published in the Boston Weekly that same month.

Another piece of literary history included in the Swantko sale could surpass US$1 million. Conan Doyle’s autographed manuscript of the Sherlock Holmes tale The Sign of Four , 1889, is estimated to achieve between US$800,000 and US$1.2 million.

Consider This Your Permission to Spend More Money in 2022

Inflation and other factors likely mean you’ll spend more in 2022. Here’s why that’s OK.