How to Spending Mindfully on the Road to Financial Wellness
We make money to spend money. But the better you get at spending, the less you pay, and the more affordable things can become.
A budget will help you spend your money on things you value. You’ll find money to spend on wants and needs and everything else in between.
Creating a Spending Plan
Know where you’re money is coming from and where it’s going. Every financial journey starts with a budget which is just a word to describe a system to monitor your spending. To overcome the dreaded term “budget” we’ll refer to them as a spending plan.
A spending plan is a blueprint to help you manage your income, spend on needs and wants, and allocate money towards future goals.
- A spending plan helps you understand your cash flow (income and expenses) and gives you the necessary information to make better financial decisions.
- A spending plan can help you achieve many of your financial goals. Don’t think of it as limiting you from doing what you want to do. A budget is a plan that determines if it is affordable now or later down the road.
- A spending plan can help you identify areas where you’re spending money carelessly. It’ll help determine areas to stop spending, cut expenses, and save.
- A spending plan can decrease your stress level because you now have a financial plan of action.
Budgeting is an eye-opening process. How much money are you making? How much money is spent on your living expenses, bills, or discretionary spending?
Learn more: How to properly create a spending plan
Our habits are based on our lifestyle choices. Lifestyle choices are sticky and come with a price tag. In order to keep up with a specific lifestyle, we may forgo saving and use credit for cash flow difference.
Needs Versus Wants
- What we need is actually much less than what we think we want.
- We make purchases based on brand loyalty, impulse buys and retail therapy.
- We spend for immediate gratification putting present wants over future needs.
- Are you Unconsciously Spending on Likes Not Loves?
- Why You Shouldn’t Struggle Keeping up with the Joneses
Questions to Ask When Making a Purchase
Spending derails us from our savings goals. To determine if what you’re spending on is necessary ask the following questions:
- Do I need it?
- Do I need it now?
- What will happen if I don’t have it?
Asking these questions creates a momentary pause. It makes you aware of the purchases and can help you curb any impulse buying or purchases that can be deferred later.
Some examples of mindlessly spending:
- Purchasing goods that keep us from buying the things we truly want.
- Spend money on expensive dinners and drinks but wondering when you can “afford” a vacation.
- Buy a luxury car and complain about not making enough money.
Understand these rules to help you mindfully spend:
- A bargain isn’t a bargain if you actually don’t need it.
- Don’t spend more than what you make.
- Purchase things you love, need, like and want. In that order.
Track Your Spending
Use apps to help you monitor where your money is going. These apps are helpful to see an overview of where you spend and can help you cut back.
Personal Capital, a free app, aggregates your financial accounts and tracks your spending into categories.
Ways to Spend Less
Entertainment – Dinners, movies, and fun outings tend to be big-budget items. By reducing the number of dinners out and using coupons or deals can help you continue to live while reducing the expense.
Household – Limit your food expenses by using coupons and store brands. Lower utility expenses by unplugging electrical devices, turning off lights and using energy-efficient appliances. Additionally, cutting cable or home telephone service may be an option.
Transportation – If you work in a city, use public transportation or carpool. Keep your car maintenance in order to ensure better fuel mileage.
Cell Phone – Call your wireless company and negotiate for a discount. Analyze your cell and data usage. By reducing the amount of data used could lead to big savings. If you work for a large employer you might be eligible for a company discount. These could range from 5% to 19% or more.
Banking – If you’re paying fees to have a checking account, debit card or any other types of banking fees consider switching to a bank with lower or no fees. Credit unions can be a better alternative too. Check your bank statements for fees paid annually, monthly and transactionally. Additionally, cut down on ATM fees by using surcharge-free ATMs.
Credit and Loans – Negotiate with your creditors and financing companies to lower interest rates and remove any late fees. Consider refinancing higher rate debt to lower interest rate loans. Do your best to pay off credit card debt as soon as possible.
Discretionary – Are you paying for a gym membership or streaming video services? Find alternatives such as cheaper gyms or working out at home or running around the block. Use cashback apps like Rakuten or others to spend less on your groceries, gas, and any many purchases online. Check the financial marketplace to find cash-back apps.