Today’s guest post about conscious spending is from Anna, owner of Canadian shopping community, Bargainmoose.ca. On Bargainmoose you can find the latest promotional codes, shopping deals and freebies, and other daily ways to save on purchases.
Conscious Spending: Four Tips from a Pro
If you were to ask yourself how much money you spent on snacks and drinks when you were out and about in the last week, would you be able to give an accurate answer? That’s the way many people live their entire lives. They throw money away on a day-to-day basis and pay the bill at the end of each month — all without a single thought about how their spending fits into their money strategy.
Conscious spending has greatly increased in popularity (if not practice) over the last few years. Conscious spending could mean different things to different people. For some, it may be accounting for where every nickel goes. For others, it could mean spending in accordance with your core principles. I’m concerned with how conscious spending can help you work towards your personal and financial goals.
Here are a few tips on how to spend your money consciously:
Conscious Spending Tip #1: Track your initial cash flow
The very first step on the road to conscious spending is to know what you’re actually spending money on. Taking a look at your credit card and bank statements for the last couple of months will help you build up a clearer picture of what you’re buying. Even better: write down every expenditure for a month. For analysis, group expenses into categories like entertainment, clothing, food, and work out the percentages that you’re spending on each. You could use a tool like Mint.com to reduce the work involved.
Now you’ll have a much better idea of what cash goes where. Only then can you make an informed decision to cut back, because you’ll be able to identify areas of waste and the purchases you don’t want to part with.
If you’re buying a take-out coffee for $4 per day during the work week, that’s a total of $1040 per annum (Editor Joe’s note: except I hope you aren’t working 260 days a year because that would mean you don’t get holidays or vacation days. If you do, you probably need the coffee so just switch to Tim Horton’s). Do you really need to spend a thousand dollars on coffee? Not buying that daily coffee could mean a thousand dollars in budget-slack that you could put to a different use, depending on what you aspire to – perhaps a well-needed vacation?
Conscious Spending Tip #2: Interrogate yourself
There are many questions that you can ask yourself before you make a purchase to ensure it’s actually an act of conscious spending. For example:
- Do I need it?
- Can I afford it?
- How much will I use it?
- Is there a substitute that will work just as well?
- If I do need it, do I need it right now?
Give yourself truthful answers to these questions and any others that you can think of. Interrogating yourself will help you arrive at better conscious spending decisions. Apply intelligently. If you’re in a Banana Republic you should probably ask yourself more questions than if you’re in a dollar store.
Conscious Spending Tip #3: Pursue a value-based spending system
Conscious spending does not necessarily mean being cheap all the time. It could mean intensely researching the best product to maximize your long-term value. Obviously this applies more to high cost purchases like cars, and less to purchases of shampoo. For example, you could save thousands of dollars by purchasing a good quality 2003 Chevy Malibu*, rather than a terribly overpriced, brand new Hyundai Elantra*. We all know that vehicles depreciate at a rapid rate — not to mention the interest on a car loan or the cost of capital if you spent your own money. Consciously choose to not waste your money by purchasing a new car. Not only is that conscious spending, it’s excellent self-discipline.
Conscious Spending Tip #4: Focus on what you have, not what you don’t
In our consumer-focused society, we’re raised with an ethos of needless consumerism. We’re bombarded with marketing messages to buy a new iCrap* and Hummers*. Why not think a little differently? No, I don’t mean you should become a granola-munching mountain biker who cares about turtles more than humans*. Be unique; don’t rely on your stuff to make you unique. Think about what you do have, rather than what you don’t. You’re probably reading this article on a laptop (maybe even a tablet or your cellphone). You’re privileged to be doing so. Daily internet access, on its own, puts you in a lucky minority.
In sum, conscious spending is about cutting back on the things that don’t really matter to you so you can spend more money on the things (or experiences* or investments*) that truly do matter to you. If you actually implement conscious spending, you’ll probably end each month with more money in your pocket. Don’t waste it on Starbucks. Unless you really like their coffee.
*Editor Joe’s note: I added some specific examples to elucidate Anna’s points about conscious spending.
“If you’re buying a take-out coffee for $4 per day during the work week, that’s a total of $1040 per annum”
The Latte factor? Really?! I expect better! Even from a guest poster. This is well-trodden ground and needs a fresh approach.
Well-trodden ground, yes. Lame, even? Yeah. I’m honestly sorry that today’s article bored you.
But at least in terms of advice the article is solid. When the article’s content neared the typically absurd cost calculation (i.e. that people will spend the maximum amount, every day) I pointed out to readers that this habit could cost a lot less (e.g. 5 days a week for 46 weeks a year times a $2 coffee is less than $500 a year). The “bag your own lunch” factor might be truer, but I think that’s even more overused as of late. Further, the article spends just as many words talking about the opposite end of the spectrum — saving on the large purchases. The key is that you should do more than just one thing to build wealth. Avoiding coffee everyday, on its own, won’t make you rich. Being a Trent Hamm-ian miser could actually cost you hugely, because you won’t have the opportunity to socialize and get to know people on a more genuine level. The article could have made that a bit clearer. On that last point, I can only imagine Trent Hamm saying in response to me “You should politely ask the coworker if you can take your own coffee and accompany them to buy their coffee.” Except that he’d probably rage about the 15 minutes in “wasted” employer time.
“Further, the article spends just as many words talking about the opposite end of the spectrum — saving on the large purchases. The key is that you should do more than just one thing to build wealth. ”
Well said, and very true. I just don’t expect to see the low hanging fruit plucked on your (wonderful) blog, which usually eschews such obvious advice and dares to be vastly different than the Trent Hamm’n'Potatoes blogs of the world. And yes, the end bits of the article are more on point. Maybe I should have more coffee before I comment.
No way, stay critical.
I argue against the kind of trite, patronizing personal finance advice embodied by the latte factor all the time. Just yesterday, I ripped into a blog that told readers how to write cheques. As my friend Greg from ControlYourCash says (I’m paraphrasing), it’s much easier for commenters on crappy blogs (most of whom are looking to promote their own site) to say “awesome job!” on a poorly written article (that was written to justify its author’s stupid decisions) than to read an interesting, well-researched article from which they can learn something and engage in the critical thought necessary to respond.
For example, Glenn Cooke wrote an extremely good article about joint first-to-die insurance. I needed to read it more than once to absorb the information, but I now understand these policies much better than 99% of non-insurance brokers. Meanwhile, pretty much nobody commented or liked it or anything. Why? It wasn’t an easy read. The Toronto Sun figured this out long ago. Trite fluff pieces get published because people disproportionately respond to them and, bonus, they take almost no work. That “cheque” article that I told you about has DOZENS OF COMMENTS. Readers who don’t criticize this fluff, and who fail to comment on/like/tweet the tough articles, need to shoulder some of the blame.
Sure, the article has redeeming qualities but it’s only right that I get called on the non-redeeming qualities because I write or edit/approve every article.
I like your writing, and if you ever want to do a guest post please let me know.
I tracked first my and then my family’s spending for over 6 years. I like to think that it helped immensely in getting us to where we are today, and avoiding a lot of the common pitfalls of lifestyle inflation. My income alone grew by about 70% (and my husband’s by 100%, since he finished school and started working) in that time so there was a LOT of room for lifestyle inflation to creep in. That is not to say that we resisted it all (because we certainly don’t live the way I did when I was fresh out of school), but we made conscious decisions throughout about where and how to spend our money.
Also, I don’t disagree with the last point but I think it needs to be recognized that, especially with the explosion of the internet (alongside traditional media), NOT focusing on what you don’t have isn’t as easy as it might once have been. Peasants in the Middle Ages spent most of their lives in contact with other peasants for the most part. They didn’t get to read glossy magazine spreads about what clothes the queen wore, or how many horses the king had. More importantly, no one was around to tell them that they, too, could have the same things. Nowaways, people have (indirect but instantaneous) contact with celebrities big and small, and the message they are constantly hearing is that “you, too, can have what they have”. Oh, and “you, too, deserve it all”. I am by no means excusing the current trend of entitlement and irresponsibility, but we gotta remember that the whole “you are so privileged just breathing this air/living in a democracy/having internet access, etc.” is a bit of a facile statement. I think it’s important to tell people to be conscious consumers not just of the goods being peddled to them non-stop, but also of the messages being drilled into their brains at the same time.
Sorry for the rambling, semi-diatribe
Good post!
Absolutely. Don’t grab a glossy magazine in the checkout aisle. Watch less TV. Since going on parental leave, with the exception of Sons of Anarchy, I haven’t watched almost any TV. I legitimately only sat down ONCE during the Olympics for about an hour. Too much to do. I don’t wake up with the radio any more, so I don’t even get those ads. My exposure to internet advertising has increased, but that’s about it (and, thanks to Google focusing the ads that I see on banks, survivalist gear, and precious metals, I really don’t feel overexposed. I just feel a weird desire to buy motorcycles and leather.