Find out how Conscious Spending removes guilt from buying the things that bring you joy, while simultaneously achieving your financial goals.
As you may have guessed, I consume a ton of personal finance articles. It seems that just about everyone has opinions about personal finance and a blog to prove it. The downside is that it can be tough to tell the difference between an expert and a blowhard. The upside is that there is enough variety available that you can find an approach that works for you.
Recently, I read an article and found a new-to-me concept that I absolutely love! It led me down an internet rabbit-hole that uncovered a super cool way of thinking about spending. The article was from InvestedWallet.com about reducing guilt while spending.
The concept I learned was Conscious Spending.
What is Conscious Spending
On my trip around the internet to learn about Conscious Spending, one of the most straightforward definitions I found was from Forbes:
“[C]onscious spending… is the belief that once you examine your consumer habits and understand where you derive the most enjoyment, you can… better utilize every dollar”Forbes: four steps to conscious spending
So, basically it is the Marie Condo of personal finance. Spend on things that bring you joy and skip everything else.
But, it is about more than just maximizing joy. Conscious spending is also about thoughtfulness and participation. Don’t just blindly spend until your account drops to zero. Take the time to determine what your financial goals are and what it will take to achieve them. Then, build a spending plan that gets you to your goals.
How to Achieve Conscious Spending
Achieving conscious spending really just takes three steps.
Step 1: Figure out what your financial goals are.
Step 2: Make a plan to achieve those goals.
Step 3: Execute your plan.
I know that is incredibly overly simplistic. But you have to start somewhere.
Step 1: Figure out what your financial goals are
Whatever your financial goal may be, write it down. Do you want to stop living paycheck-to-paycheck? Maybe you want to have a certain amount of savings set aside for emergencies? Do you need to upgrade your vehicle? Send kids to college? Retire and not depend on Social Security?
Whatever your goal is, write it down, be specific, and give yourself a deadline. For example: Maybe you want to have a $10,000 emergency fund in place within the next 12 months.
Step 2: Make a plan to achieve those goals
When you have a specific financial goal with a specific timeline, creating a plan just comes down to simple math.
In this example, you want $10k in the next 12 months. That would require about $835 per month to achieve. Where on Earth are you going to find $835 per month?
Have you tried the Undetailed Budget yet? You should. There are only four parts: Income, Recurring Expenses, Personal Spending, and Saving.
In this example, you already know that you want the Saving number to be $835.
Next, figure out your current Income and Recurring Expenses. If you don’t change your Income or Recurring Expenses, can you achieve $835 Savings per month and survive on the remaining Personal Spending?
If the answer is yes, then you have a plan!
If the answer is no, then you will have to find a way to either boost your Income or reduce your Recurring Expenses. As a last resort, you can reduce the savings goal and push back the deadline. For example, you could do $500 per month for 20 months and still get your $10k… it will just take a little longer.
Step 3: Execute your plan
Once you have solved the Undetailed Budget math problem, you will know exactly how much you can allocate to Personal Spending every month and still achieve your goal.
Then, as long as you stay within that amount, you can buy absolutely anything you want and be completely guilt free. Avocado toast? Sure! Fancy lattes? Absolutely!
Shift focus from Saving to maximizing the value of your dollars
Something happens to our brains when we shift our focus like this. It is more positive reinforcement instead of negative punishment. It is a carrot instead of a stick.
So many personal finance gurus suggest things like “pay yourself first,” or “buckle down so you can save.”
As I discuss in Part 1 of my book, Practically Independent, “pay yourself first” sucks. You’re supposed to move some of your pay into your savings account immediately after getting paid. Then, when you have adjusted to your new, lower income, you can boost your savings even more by increasing the amount of your transfer.
Lets say that another way. Step 1: force yourself to reduce your discretionary income a little (that’s no fun). Step 2: when you’ve done a good job at that for a few months, punish yourself and reduce it even more (ew, no).
You’re literally punishing yourself for succeeding!
On the other hand, Conscious Spending suggests that you focus on maximizing the value of your hard-earned dollars. If something doesn’t bring joy, don’t buy it! But, more importantly, be thoughtful in your spending.
Guilt-Free Spending Rocks
As always, this is a judgement free zone. I will never judge you for what you choose to buy with your own hard-earned dollars. If you want to go buy $5-lattes, then go buy $5-lattes!
The trick is to build a system that allows you to spend on the things you want without guilt or remorse.
It is very freeing to know that you are not ruining your future when you spend, as long as it is part of your plan.
So go ahead: build an Undetailed Budget, and give yourself permission to spend the amount you determine for Personal Spending. And, do it guilt-free!
Creating and executing a personal financial plan should not feel like punishment. I would imagine that it is very difficult to stick to a budget if that budget feels like all it ever does is tell you what you can’t buy.
On the other hand, a budget that is built simply and thoughtfully can be liberating. It tells you what you can buy, guilt-free, without any regrets.
Take the time to figure out what your financial goals are now. Build a plan to achieve those goals. Execute the plan. Oh, and don’t forget to leave room for cheat days!
I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.