For far too long everyone dealing in finance has spoken about budgets, cut back on this, cut back on that and so if you are like a lot of people, whenever you hear the word budget it brings up feelings of negativity and thoughts of I never have enough. But having read I will teach you to be rich by Ramit Sethi, it opened my eyes to another way of how we can deal with our money and that way is conscious spending!
So what does conscious spending mean?
Conscious spending is an approach to managing your money that involves you making deliberate and mindful choices about where your money goes. You align your spending with your values, goals, and priorities. So rather than adhering to a strict budget or denying yourself enjoyment, conscious spending encourages you to spend freely on things that matter most to you while cutting back on areas that are less important. Below is a list of some of the key principles involved in conscious spending.
Key Principles of Conscious Spending
- Awareness: Understand where your money is currently going. This often starts with tracking your expenses to see where your money is being spent.
- Prioritization: Determine what is truly important to you. This could be experiences, personal growth, saving for future goals, or any other priorities that align with your values.
- Intentionality: Make deliberate decisions about spending, ensuring that your financial choices support your priorities. This might mean splurging on things that bring you joy while cutting back on things that don’t add value to your life.
- Flexibility: Unlike rigid budgets, conscious spending allows for flexibility. It recognizes that life is dynamic, and your spending choices may need to adapt over time.
- Mindful Consumption: Be mindful of consumerism and the impact of your purchases, not just on your wallet but also on your well-being and the environment.
- Long-term Perspective: Consider the long-term impact of your spending choices, focusing on building a sustainable and fulfilling financial life rather than seeking short-term gratification.
Having read through the key principles you may think that you’re doing this already. But what a lot of people find out is that once they look at the steps below for practicing conscious spending, they realize that a lot of their current financial decisions are made from past experiences and they haven’t reevaluated them as their life has changed. Our suggestion on beginning conscious spending would be to first go through steps 1 to 3 on the list below and see if your current spending habits align with your goals. We will be going into more detail in future blogs but for now the first three will do.
Steps to Practice Conscious Spending
- Track Your Expenses: Start by monitoring where your money goes. Apps, spreadsheets, or even a simple notebook can help you keep track.
- Identify Your Values: Reflect on what matters most to you. Is it travel, health, education, family, or perhaps early retirement?
- Align Your Spending: Adjust your spending habits to focus on your values. For example, if travel is important to you, you might choose to spend less on dining out to save for trips.
- Regularly Review Your Spending: Check in with yourself regularly to ensure that your spending aligns with your values and goals. Adjust as needed.
- Cut Unnecessary Expenses: Identify areas where you can cut back without sacrificing your quality of life. This could be subscriptions you don’t use, impulse buys, or other non-essential expenses.
- Celebrate Your Progress: Acknowledge the positive changes you make. Conscious spending isn’t about deprivation; it’s about making choices that enhance your life.
Remember conscious spending should be a balanced approach to personal finance, it helps to promote your financial health and well-being by encouraging you to spend in ways that are meaningful and fulfilling to you. You still do have to track your money and be aware of what you spend and where, but hopefully having chosen where every penny goes, makes handling your finances more rewarding and enjoyable, enabling you to prosper.
