I don’t know how many times I’ve bought something only to realize a year later that it was a complete waste of money. I mean, I loved what I bought and all. Or at least I thought I did at the time. But now I look back and realize (with some frustration) that it was pointless. And it cost me money. That was cash I wish I had today, but alas, it’s gone. To survive financially, I had to master the technique of making very intentional, or mindful purchases.
Spending money is easy to do. Our world is full of instant gratification. We can shop on our tablets and phones in a matter of seconds. It’s easy to buy with one-click purchases. Web browsing has certainly fulfilled the impulse shopper’s addiction. I don’t know about you but without restraint, I could easily spend my whole paycheck in one day. Nope, let me correct that. In probably 15 minutes…
But just because it’s easy to do doesn’t mean that you have to fall prey to this temptation. You can, in fact, have greater financial success by beating this. However, this is not an easy battle to be won. In fact, advertisers spend billions on advertising dollars to get that dollar from your wallet to theirs. That’s some serious money. They take their job about getting your money more seriously than you do in keeping it.
Think about that for a moment… Don’t believe me? When was the last time you spent vast amounts of time brain-storming about your money? Well, guess what? They did.
Nonetheless, the bottom line is the power is still in your control. It’s your money, not theirs (so far). So, with that in mind, let’s examine a technique to save you from these pervasive advertisers: the skill of being attentive to what you actually buy.
The Art of Mindfulness
As you probably already know, being mindful of something is just a conscious state of being focused on the present moment or situation and recognizing one’s feelings concerning it. That definition may be too simplistic, but let’s continue anyway. What does it mean to be financially mindful concerning our spending?
Mindful spending is the opposite of impulse buying. It’s being aware of your bank account balance and where those dollars may be going. It’s recognizing the choices before you and making conscious, purposeful decisions about them.
Mindful purchases will help you feel good about what you’re spending your money on, knowing the ramifications of your purchases even if you’re not necessarily making the “most appropriate” decision with your money. Not every decision has to have financial priorities as the goal: it’s ok to occasionally spend frivolously and enjoy your money, but by being mindful, you recognize where this money is going and what it’s intended purpose is.
Many of the problems I had earlier in life stemmed from not caring what I was doing with my money. Some things were done because it was my routine. Occasionally, these decisions would be good and other times not so good, but I just didn’t pay attention to where that money was going. I had no intent behind it.
And I paid. Dearly.
Have you ever done something out of habit without thinking about it? Or drove somewhere having things on your mind, and you later realized you couldn’t remember all the details of the trip because your mind was elsewhere? I doubt I’m talking about you!
It’s the same thing financially. Most of us can go through life and spend without even realizing it. We’re disconnected from our spending. And we have no recollection of where our money went.
We plunk down our card for the morning coffee. We cruise our favorite online store for something we need. Then there’s lunch. Working late? Oh, yes, dinner too. Try asking us to add up all those expenses and we might tell you a few but probably couldn’t connect all the pieces of our spending together. It was automatic, habitual, and very easy to do.
Being financially mindful means that you’re taking the time to be present during your spending. That you’re not making these purchases on auto-pilot. But is that all it means?
We have to take responsibility
It also means taking responsibility. I mean, I could technically say, “yep, I’m looking at that jelly donut. It looks good and I’m making a decision to buy it.” But it’s obviously deeper than that. We have to weigh the consequences: is it a good or bad decision (ok, the jelly donut is a bad one for me!)
And although this sounds like a complicated process, it really isn’t. You just have to train yourself to consider these things (and you can do this in a matter of seconds) before you pull out the wallet. Once your money is out in the open it’s much harder to say no.
How To Be Mindful
I’m guessing you realize that there isn’t just one secret technique here. It’s personal so it has to fit you. However, there are some universal concepts. Let’s take a look at those below.
1.) Pause before you buy
Yep, this is one of the best-kept secrets out there. This forces you to concentrate on what you’re actually doing. Especially when we’re dealing with credit cards. It’s just too easy to swipe that card. It used to be a bit more difficult with cash. We would have to actually count the bills out. We felt the pain of that money leaving our wallet never to return.
Not so much with credit cards.
With some purchases, you only need to pause for a second. Pause in line at your favorite store. Pause before you hit the “pay” button on that web browser. This
makes you a bit more intentional about your purchase. With larger items, there is nothing wrong with waiting for a while. A few hours or even a few days. The larger the purchase, the longer the wait if possible. There have been many times I’ve put something in my cart, left it for a day, and realized I didn’t really need (or want) it. Money saved!
2.) Know why you’re shopping
It feels good to shop. Thus the reason for the saying, “shopper’s high”. But it usually only feels that way for a while. Believe me, I know. I’ve been out of town, bought some nice items, felt good about them, then got home and started feeling a little bit of regret. Some items were worth it and ended up being good purchases. Others not so much.
Our emotions are tied up in our shopping. This is a very real thing. We feel elated about finding good deals. Black Friday. Cyber Monday. 20% off. And countless other “deals” out there. This is designed very intentionally by marketers. They know if you buy on a deal, you’re more likely to be back to buy again. And again.
So be sure your “why” isn’t to just chase after the next good deal. Because remember, even though you saved 20%, you could have saved 100% if you chose not to buy because you didn’t really need or want it in the first place. Don’t let sales sucker you in.
What’s your purpose?
So, always ask yourself what your purpose is. And it’s okay to splurge a bit here and there if you can afford it. But getting into a habit of purposefully or mindfully using your money will also bring you happiness. Because you’ll know that what you bought was not only a good buy but important and usable in your life.
3.) Ask yourself a few good questions
- Why do you want this? It should be easy to distinguish between need and want (of course, many things I thought I “needed” ended up being only “wants”).
- Is this going to better my future? You don’t have to go all frugal here. Life is meant to be enjoyed too. But it’s ok to consider what this purchase will do for you. Yep, that coffee stop may be just what you need to get your day started out right. Just don’t let small purchases grow into habits – these can get expensive if you do!
- Do I need to spend the money or will something else suffice? If you’re buying because you love the feeling it brings, look at other options. Can you recreate those feelings without spending money?
- Is this an impulse buy? If so, stop. Step away and reconsider.
4.) Really consider those big purchases
For the most part, many of our decisions about money are quick and decisive. Because it involves smaller purchases: should you go out or eat in? But larger purchases are a whole different story. Everyone’s idea of a “larger purchase” will be different. But let’s stick with anything over $500.
For myself, my main rule is this: the higher the cost, the longer the wait. I’m sure we’ve all been at a point where we want the softest sofa for $1499. The latest workout equipment for $1899. These obviously are pricey items. Not like your quick bagel purchase from this morning. These should take time to consider.
For starters, many people can’t go out and purchase these items with cash. Otherwise many of these items wouldn’t be offered at a zero percent interest for 12 months to entice you.
Tip: if you can’t afford to go out and plunk down cash, pause. Like for maybe a day or two at least. Give yourself some perspective and consider if you really need it.
But our temptation for more expensive items certainly doesn’t end there. There is the new car that’s going to cost you $35,000. The RV, the boat… You get it. These are very costly items. Then there is the home for $350,000. Now we’re talking serious money. You need to be really be mindful of these purchases. You better consider them at length, make sure this is what you want because now these items can change your destiny. Literally.
Not sure what I mean?
Opportunity Costs: The Future You’ll Never Know About
What the heck are opportunity costs? In simple terms, it means a benefit given up to acquire something else. Want it in really simple terms? It means a “trade-off”. It’s what you could have done had you not made your first choice. You’re giving up one thing for something else.
How does this relate to mindful spending and finances? Well, glad you asked!
Money can seem to be everywhere out in the world, but in your pocket (and mine) it’s finite. There is only so much of it. So we can’t buy everything we want. So when we buy one thing, we often sacrifice buying another thing. But it is so much more than that.
Since you’re reading this you’re probably interested in having financial success. In building your financial future. When you buy something you want now, you may be sacrificing something else, financially. Buying a large purchase might stop you from paying off your debt. If you keep buying large purchases they can put you further in debt as well. Spending that $35,000 on the car you love can cost you much more than that sticker price.
It can stop you from building that emergency fund. This might lead you to borrow on credit for that emergency. And at a 14%+ interest rate, that gets expensive!
It can hamper your retirement savings. Imagine if you instead kept the car you have now, preferring to do a little maintenance here and there and instead investing $30,000 the money you saved into an average S&P 500 Index Fund. Let’s use a basic 7% return for the next 30 years. This can be some serious money…
This can grow to over $228,000! Of course, there are many arguments about risking your money in the stock market, but even you achieved only half that, it is a lot of money! That car could literally cost you almost a quarter-million dollars! This is a lost opportunity that you can never get back. Sure, you could “later” contribute some money, but this money you spent is now gone. That opportunity is now lost.
I’m not saying you must be frugal to the point of forever driving a car that’s breaking down on you, but you must consider the opportunity cost of your decisions. You can always be financially smart now and buy that car later. You may not enjoy thinking about it, but opportunity costs affect each of us whether we like it or not.
The Benefits of Being Mindful
Now that you know the how (and a bit of the why to be financially mindful), what are the benefits? I mean, we’re in this to have our efforts reimbursed, correct? Some of these, I’m sure you’ve picked up along the way, but let’s take a look.
Helps you realize what you really want (and need)
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- Remember when I told you that I’ve bought things that a year later I thought were a complete waste of time and money? Well, guess what? Since then, I’ve also not bought things that later I’m so glad I skipped. This has helped me to keep the “excess” of things in life in proper proportion. It’s ok to have some luxuries in life, but living in excessive overspending usually only brings more debt and much more stress.
You’re mastering the ability to just say no
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- We all want things when we want them. We were this way as a kid and like or not we’re like this as adults (yep, I’m guilty!). But as we were trained as a child with not getting everything we wanted, we are now training ourselves to save money which in turn will benefit our financial future selves. Trust me, tomorrow you will be glad for your choices today.
You’re forced to value your money more
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- Because the money in our wallet is limited it should be valued. By taking the time to be mindful you’re remembering its power. It has the power to help you or hurt you. Spent wisely, this money can build a tremendous future.
You’ll pay off your debt faster
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- Yep, this is just basic math. Spend less on other things and you’ll have more to end your debt problems. Know what? Keep this up and you will be on your way to less stress and a better financial future. Don’t believe me? Get rid of all your debt, come back and tell me how you feel…
You’ll have less regret
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- Thus this increases your happiness. Overall I’m happier with my purchases knowing that I spent the time making sure they were good decisions. This brings me more joy and greater happiness. There is a great benefit in having no regrets!
You reinforce quality over quantity
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- By mindfully spending your money, you consider your purchases more carefully. It is money out of your pocket so you not only want a good deal, but you want something that lasts. Sometimes these things do cost more initially but you end up saving in the long run because its value continues for years to come.
It’s a source of pride
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- Spending money mindfully is a reason to be proud. Ever think back on a project that you’ve done well and have a great feeling of satisfaction, that you accomplished something worthwhile? Well, it’s the same with money. If you don’t think about it, money will just come and go without you really noticing the details. Spend it with purpose and that intentionality can return great rewards. No matter how small your wins are, you’re aware that you’ll eventually reach whatever goal you set.
Enables you to accomplish long-term goals
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- By mindfully spending your money you will have more access to funds. You’ll know when to say no to over-spending. You will know when you don’t really need (or want) something. You’ll then be able to see the true value this money can do for you, what workload it can accomplish on your behalf. Trust me, over time this will change your life.
Summary
So as you can see, mastering the art of spending mindfully can have some tremendous rewards. Money will always come and go in our lives. If you live your life not paying attention it will slip through your fingers without you really noticing it. And this can affect your future greatly.
By practicing the art of mindfulness, you will be intentional with your money. You’ll appreciate what you spend your money on, knowing that by purposefully directing that money, you’ll ultimately find greater peace with your finances.
With a little bit of practice, it will become second nature to you. I’ve applied these practices in my life and I feel more in control of my money. I’m certainly not always perfect. I do allow for some luxuries in life as well. But I feel that my money is better utilized on my behalf. That it’s actually working for me and not against me.
Hack: Give this a try in your life. Take 10 seconds before any purchase and at least consider if that money leaving your wallet is enriching or detracting from your life. Yes, this takes a bit of discipline. However, I feel that your (and my) life will be all that much more enjoyable because of that 10-second pause.
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