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.