We all have that friend. The one who turns every conversation about debt into a sob story. They can’t stop talking about their awful credit card debt and horrible student loans. Meanwhile, they’re burning through credit card-financed chai lattes at an alarming rate and always seem to have new designer clothes.
On the flip side of that coin is “The Monk”. Your friend who’s so proud of his minimalist lifestyle that he can’t shut up about how he only eats lentils or rice and sleeps on the floor because “mattresses are so bourgeois”.
Somewhere in between those two extremes is you. Your occasional credit card binges and shopping sprees leave you feeling a little guilty about how much you’re spending. Perhaps you’re even slowly racking up debt that you know you can’t realistically repay each month. Fortunately, there’s a better way to live.
Conscious spending is the idea that you get to decide when and how you spend your money. Instead of just dropping cash (or worse, credit) on everything, you purposefully evaluate how much enjoyment you get from it. If it’s worth it, you pay. If not, hold back. It’s not some challenge that’s meant to torture you. Instead, it gives you full control over your spending habits. Here are four questions you should ask yourself to get started:
Where are you spending right now?
Look, really look, at your spending habits. If you’re so inclined, write down all your purchases for a month. Don’t beat yourself up over it. You’re just trying to become aware of where you spend money. If you’ve dropped $100 a month on overpriced coffee, it can be shocking. But don’t worry – you don’t have to cut out your frappes completely, unless you want to.
Does spending money on [whatever] make me happy?
Fill in the blank on this one. Does your frappe give you enjoyment? If it truly takes a frappe to make your day a little bit better, then by all means, keep purchasing them. Try cutting back on the extras: If you don’t care about the bagel, don’t get it. Instead, make one at home. If your heart flutters when you think about cutting something out of your budget, then hang on to it. Just stop spending on the things you don’t care about.
What do I get out of spending money on [whatever]?
Some people buy coffee simply for the caffeine. Others purchase it because they’re rushed in the mornings. Some people get it to enjoy sitting and people watching. Figure out what you get out of the deal when you spend money. Could you get the same thing somewhere else for less? For instance, if you really get a morning coffee because you like having somewhere to sit and do a crossword puzzle, try sitting on a park bench or finding a nice, quiet and free space.
Is there somewhere else I’d rather spend this money?
Whether they’re saving up for a vacation or just to pay off debt, almost everybody has at least one or two financial goals. When you purchase something, think about whether or not you could use the money elsewhere. Would you get more happiness by using the money for another purpose?
Conscious spending is a great first step to deriving financial goals that make sense for you. If you’re perfectly happy spending on fancy coffee, even if it means slowing down your retirement savings, then keep doing it. Just make sure you do it consciously.
About the Author
Frugal may be her middle name, but Carly Lance does it with class – which is why she loves to write about saving money, to help others learn from her cheap (but classy!) ways. Carly is also a blog coordinator for Personal Bankruptcy Canada”, a company that helps with bankruptcy in Canada – whom she also blogs about finances for.