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A common tactic to combat anxiety or stress is spending. And right now, there’s a general sense of worry, which is leading many to spend more than they typically would.
According to a recent survey by Intuit Credit Karma, 96 percent of respondents are concerned about the current state of the economy. In response, over a quarter of those same respondents are taking part in what’s dubbed as “doom spending” or spending above and beyond their normal rate, despite the concerns in the economy.
For private practitioners, sole entrepreneurs, or freelancers, this urge to spend on the business can rise when things don’t feel as solid moving forward. Unlike employees, solo operators can use the business to hide their nervous spending.
The less certain we are about our finances or income in the next month, quarter, or year, we may look for ways to boost it. In some ways, this can benefit us when we land on a marketing strategy to grow our business. Other times, it can lead the business into debt or wasted investment in unfruitful strategies.
What this results in, long-term, is less profits and more stress for you, the sole business owner.
To rebalance the business spending, it’s important to take certain steps to make sure your expenses match your goals.
Business Expenses vs Business Expenses
First, you need to recognize where the issue lies. As a sole business owner, it’s common to view every expense as a business expense.
But this is the case only for tax purposes. Increasing the expenses you can write off for tax purposes is a common and valuable tool to reduce taxes.
In reality, though, some expenses are not business expenses. In essence, you would still spend on these items, even if you didn’t have the business. It just so happens that you can expense them because of the business.
A good example of this sits in the home office. When you’re paying your mortgage, you would pay for the home office with or without the business. It just so happens that the Internal Revenue Service allows you to write off the home office as an expense under the business.
While we view this as a business expense, it’s a life expense veiled as a business expense for tax purposes.
This becomes a problem in doom spending on the business if you’re expensing expensive meals and trips. This probably falls under personal expenses, even if you have a way to write them off for tax purposes.
This becomes a problem when spending becomes overbearing and you suddenly feel short of money. And it can be difficult to identify since it’s under the business.
Return to your long-term goals
Often, we may seek out external solutions when fears of the future arise. A lack of a clear picture of our long-term goals can drive this desire to seek out spending. It allows us to make a move, any move, and the purchase may come with a short-term feeling of accomplishment or a sense of initiative.
But we have to keep our long-term goals in mind when taking this approach. This can make the current lull seem less pressing because your business has taken the right steps to achieve in the future.
Or it can remind you of where to focus your additional spending, to allow for more fruitful spending decisions. Even if you’re increasing your budget in the short term, there’s a reason for it. And, you’ll know where to cut when the time comes to pull back.
After all, the urge to spend due to fear doesn’t last long. It’s just managing the emotions, and your physical response, to reduce the impact when the fears reside.
