The COVID-19 crisis has almost definitely made significant changes to your spending habits – less eating out; fewer trips to the store. And if you’re working from home while still earning a paycheck, it might also mean you’ve been inadvertently saving money – little or no gas for your car.
This is the situation for many of our clients at PAX Financial Group. And while most people want things to get back to some kind of normalcy, many clients have said they want to keep the whole spend-less/save-more thing going.
This got us thinking, what small, long-term changes could you make that would help you spend less and save more? One tried-and-true financial method you might want to consider is called “mindful spending.”
What Is Mindful Spending?
Mindful spending is different than budgeting. When budgeting, you really only think about the incoming and outgoing funds probably once a month. And more than likely, you’re considering income and expenses from a pragmatic, mathematical perspective – what income you’re bringing in, what expenses and purchases that income has to cover, and, based on what is left over, what to do with the extra money. In short, with budgeting you use your brain.
With mindful spending on the other hand, you use your brain and your heart. Mindful spending is being aware of every expenditure, taking time to reflect on your feelings about a purchase or expense and identifying how it fits with your lifestyle to make more thoughtful financial decisions. Mindful spending is more of a long-term cure for not-so-great and downright-bad habits because it forces you to be aware of your spending and how that supports or discourages your goals and needs.
Mindful spending can be helpful whether you spend too much or not enough. It can even be useful if you don’t feel like you have spending issues, because it helps you identify the emotions related to your spending habits (and maybe you’ll discover some small spending problems you didn’t realize you had).
Practicing mindful spending can all but eliminate making impulse buys and unnecessary purchases you’ll regret later, because it’s hard to be impulsive when you’re thinking deeply about every expenditure.
Below are some tips to practice mindful spending. While business owners have different financial concerns than your average family, these tips can be applied to both, as we all take stock of what we really need.
Track Your Outgoing Funds
Review all your expenditures for the last month. Analyze any patterns or habits you can identify, and see if there are areas that surprise you or categories where you can cut back. You may be amazed at the motivational impact it can have just to know where your money is going. You might not think much of that $4 latte, for example, but a few a week over the course of a month or year can really add up.
Whether it’s jotting down your dinner ideas for the week or keeping a comprehensive grocery list, a little forethought can go a long way to saving money on impulse purchases. If you go to the store with a list of 10 things and you stick to the list, you’re less likely to experience the shock, guilt and remorse at checkout that often comes with impulse buys. Likewise, if you know what’s for dinner every weeknight and plan your grocery run accordingly, you’ll be prepared to whip up dinner on a Tuesday night, instead of being tempted to pick up take-out.
This isn’t just the case for the grocery store either. You may be surprised how much peer pressure can impact your spending habits when you don’t have a plan.
Use a Budget
If you don’t already have a monthly budget, you should create one and stick to it. A budget will help you keep track of your spending and stay on top of your finances so you can catch and fix poor habits and bad decisions quickly.
Even those with a high net worth can use a little help cutting back at times.
Think About What You Really Need
Has spending extra time at home given you a new perspective on what things you actually need and use? For example, if you’ve pretty much kicked that morning latte habit working from home, when the time comes to return to work, you can save a few dollars a day by continuing the trend, making coffee at home and using a travel mug.
Establish a Splurge Fund
This may sound counterintuitive – after all, we’re talking about saving and not splurging, right? But just like crash dieting often leads to overeating junk food, eliminating all discretionary spending could make you feel deprived and resentful, maybe even leading you to abandon your new mindful spending habits altogether. Even with mindful spending, it’s OK to allow yourself a little fun money once in a while for an occasional treat, like a weekend latte or a dinner out.
Unsubscribe from Shopping Email Lists
Retailers spend a lot of money on email campaigns that are craftily designed to entice you into buying things you may not need; things that are “at the lowest price ever,” or “on a one-day sale.” You might think you’re getting an amazing offer you can’t pass up, but if the retailer convinces you to buy something you didn’t really need, is it such a great deal after all?
Pause to Think Before You Buy
This may be the most important tip.
Designate an amount of time that you will wait before making a purchase, especially on more expensive things. This could be a day or just a few minutes. While you wait, consider whether it’s something you truly need and can afford? Ask yourself how long you had to work to earn the amount of money it will cost you and whether you’d be better off spending it elsewhere. If, after all this honest deliberation, you determine the purchase is still worth it, then it probably is.
This simple practice can be beneficial at any age or stage of your financial journey.
The Bottom Line
The trick to mindful spending is, of course, being mindful. Make conscious choices with your money and try to exercise self-control. Before you buy something, no matter how small or inexpensive, ask yourself if it’s something you really need, and remember that every dollar you spend is a dollar you haven’t saved and that you can’t spend in the future.
COVID-19 has affected us all in some form or another. If you’re ready to make changes and are looking for a financial advisor to work with, or if you want a second opinion, contact us. We’re here to help, whether you’re a current client or not.
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