Use Conscious Spending To More Easily Afford Satisfying Purchases

|Posted by | Psychology of Money
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What is Conscious Spending

Conscious spending makes money more rewarding by focusing your spending towards gratifying purchases. 

Have you ever noticed some people can indulge in their hobbies – be it travel or high priced dining – and yet still have loads of money saved up? They might manage this even if their income isn’t particularly high. Chances are, they’re practitioners of conscious spending: a term coined by famous financial blogger Ramit Sethi. Here’s how it works:

Conscious vs, Well, Unconscious spending

Most of us spend money on things we don’t really care for. It’s a strange concept, but think about it:

  • How many items do you have lying around, that you frankly wonder why you even bought?
  • Out of all the cable subscriptions, magazine subscriptions, gym memberships, and various automated payments in your life, how many of them do you actively use, and can’t live without?
  • How many books have you bought, that lie around unread?

It gets worse. Try tracking your expenditures for just two to three days. You may notice things that slipped from your attention before – like how you keep ordering kopi when you have whole bags of 3-in-1 in the office pantry, or how you always buy trivial knicknacks (e.g. cute phone covers or bobbleheads) that become dust collectors after a week.

The truth is, most of us are easily distracted, when it comes to money. We make purchases because of novelty value or habit, rather than because we actually need or want them.

You can probably live without a cute penguin shaped mug, or a portable foot massager, or a hundred other things that you have at the bottom of your drawers right now. There are even big ticket items that, in hindsight, you might hate yourself for buying – things like a S$50,000 renovation, or a car, or a piano that’s now a bookshelf.

Conscious spending is when you can gather up all this wasted money, and focus it toward what really makes you happy. It means having a more efficient use of your income. People who practice it are able to afford what’s important to them, without always being cash strapped.

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How Do You Practice Conscious Spending?

It just takes a few simple steps to begin:

  • Track your expenses to see where the “leaks” are
  • Know what really makes you happy, and what’s a novelty
  • Make a habit of mental comparisons
  • Don’t be afraid to set desires as goals

Track Your Expenses to See Where the Leaks Are

Over the next few days, use apps like Toshl or Mint to track your expenses. Record what you spend, and where you spend it.

You’ll easily be able to spot leaks: these are things that you’re shocked you spend so much on. You might be startled to discover you blow S$900 a month on taxi rides, or that you spend S$70 a month ducking out for coffee at the lounge downstairs.

These are areas that you need to cut down on.

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Know What Really Makes You Happy, And What’s Just A Novelty

This one is quick: make a list of things that really gratify you, so that you know what makes you “tick”. These are experiences that you always smile just to think back on, or feel better knowing that you have them. These are the things you want to channel your spending toward.

Anything that doesn’t give you that sensation, is something you can probably live without.

Incidentally, knowing what makes you happy makes it easier to optimise payment methods. For example, if you know that travel is your “thing”, then you can focus on paying through an air miles card, for the best possible benefits.

Make A Habit of Mental Comparisons

When buying something, always remind yourself of what you’re passionate about. Make it a habit to ask this question. Do you really want that S$12 mocha latte, or would you prefer to travel in three months? Would the foodie in your rather have a S$350 pair of shoes, or seven new experiences in great restaurants?

Once this becomes a habit, you’ll be less likely to waste money on frivolous expenses.

Don’t Be Afraid To Set Desires As Goals

If you want to include holidays, expensive clothes, or even video game collections as goals, then go ahead and do so – treat them as expenses to save for (after you’re done building a savings fund for emergencies).

This will focus your finances on giving you the best possible life, and one that’s fulfilling on a personal level.

Read This Next:

What Richard Thaler Knows About Your Money (That You Don’t)
5 Small Money Habits That Put You Ahead of Your Peers


Ryan
By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.