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When you think about money, do you feel that living in the moment and responsibility are mutually exclusive? Is guilt eating away at you when you go out to lunch or grab $7 oat milk?
You don’t have to think or feel this way, thanks to a flexible personal finance approach called mindful spending.
“Unlike a budget, which looks back, a conscious spending plan allows you to look forward,” said Ramit Sethi, author of the bestselling I’ll Teach You to Be Rich and CEO of the blog of the same name. “Conscious spending is about spending extravagantly on the things you love, as long as you ruthlessly cut costs on the things you don’t like. It’s not about restrictions. It’s about being intentional with your money and then spending on the things you love without feeling guilty.”
That doesn’t mean some of the old general savings guidelines aren’t valid, Sethi said — like saving 5% to 10% of your income and having an emergency fund for three to six months.
But a conscious spending plan allows you to say, “Yeah, I want to go on vacation. Yes, I like nice clothes. Yes, I’m going to spend these things without feeling guilty. I’m also going to invest and save and make sure I can cover my rent,” Sethi said.
Whether you want to save money, crush debt, or have more fun that makes you want to experiment with conscious spending, you can apply this approach as early as today. Here’s how.
The term “conscious spending” means that people struggle with unconscious spending, says Bradley Klontz, a financial psychologist and associate professor of practice at Creighton University’s Heider School of Business in Omaha, Nebraska.
“It’s almost like unconscious eating,” he said. “We’re just without a plan; we don’t really pay much attention, especially with credit cards.”
The most important thing in getting rid of unconscious spending is to ask yourself specific questions about your financial goals and desires in life: Where did my money go? What do I like to spend money on and why? How much do I need for fixed expenses, such as bills and rent? How much do I want to invest and save, and why? How much am I willing to set aside for impulse purchases or fees, such as drinks with a friend or a parking ticket?
Your answers should be very clear, Clontz and Sethi said. Saying that you want to be able to do what you want when you want is an abstraction. But do you remember that you and your partner want to travel to Italy with extended legroom, visit for three weeks and watch the sun set over Rome while drinking wine? Now this is a vivid, specific, emotional and meaningful vision, Sethi said. “What doesn’t make sense is just some spreadsheet with numbers in it. Truthfully, nobody cares.”
Answering these questions can help you feel excited and clear about your money, identify what you care less about and live by what is important to you. “After that, it’s a lot easier to cut out the areas that don’t matter much,” Klontz said.
Your answers to these questions make up what Sethi calls your “rich life”—your own life and financial goals, unaffected by what anyone else thinks you should do.
Personal example: I recently decided that on workdays, I’d drink my free instant coffee at the office instead of spending several bucks on a latte a few times a week. Weekends will be when I allow myself to indulge in coffee shops with friends.
I decided on this because on weekdays the need for more energy was the only reason I wanted coffee – while on the weekends having the money to enjoy better coffee and a good time at my favorite coffee shops was more important to me. This way, I get what I want from my coffee drinking by consciously focusing on what is most valuable to me, rather than restricting all coffee purchases.
When you are already intentionally thinking about what you value, there is no need to feel anxious, obsessed, suspicious, or guilty. When Sethi was a child, his family could not afford appetizers while eating out, he said. These days, one of his “money rules” is to never question spending money on appetizers because “I take great pleasure in being able to buy any appetizer I see that looks good,” he added. “I don’t have to decide, ‘Should I pay that much?'” or not? ”
If you want to try conscious spending, give it a try for a month. Then, using your bank statements or budgeting app, review what happened, what worked, and what didn’t.
“It’s not going to work perfectly the first time. It’s a system that you’re going to be constantly adjusting,” Sethi said. “But in general, you’ll start to get a sense of how it works and what you need to change. And then you make the change every month after that.”
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