Want to have more clarity and control around your spending in 2023? Below I'll share how to build a mindful spending habit.
I haven't maintained a personal budget for years. They never really worked for me. After trying and failing at budgeting, I finally found a better way.
Automating your finances (giving every dollar a job) coupled with mindful spending is the winning solution for managing my spending and ensuring it's aligned with my vision and goals.
What exactly is mindful spending?
Mindful spending is a conscious and intentional approach to managing money that enables you to align your actions with your values and priorities.
It involves:
taking your personal well-being into account
allowing yourself the time to make intentional decisions
being present and focused while you are making financial decisions
making decisions that serve your unique needs and desires, not society's
considering the impact of your decisions on both short- and long-term goals
If this doesn't sound like how you operate today, don't fret. Our biology and the external world conditions us to be mindless with our financial decisions. But you can change that trajectory right now.
Here's how, step by step:
Step 1: Define your vision and values
In order to make mindful spending decisions, you must first get clear on the vision for your life and what you truly value. This will guide your goal-setting and help to prioritize your spending.
Step 2: Plan ahead and take your time
We make mindless decisions when we're pressed for time and in situations that make impulse choices too appealing. To counter this, plan your spending in advance and if you face an unexpected choice, buy yourself more time (24-48 hours) before deciding.
Step 3: Categorize your spending
It's important to categorize your spending so that you can identify patterns. But this doesn't have to be time intensive or involve a bunch of spreadsheets. Just download a money management app like Mint or Personal Capital and let it do the work for you.
Step 4: Add painless friction through automation
After categorizing your spending, determine how much money you want to allocate towards your goals, bills, and recurring expenses. Then whatever is left over transfer to a special account from which you can spend freely on whatever you believe aligns with your vision and values.
Step 5: Review your spending regularly
Keep a pulse check on your spending (only 15 minutes per week) and try to just observe, not judge. When you are tempted to label something as mindless or bad, simply say "oh, that's interested" and explore the situation, behavior, and mindset that led to those results.
Step 6: Practice gratitude and forgiveness
Forgive whatever actions you have deemed to be mindless and shift your focus towards being grateful for what is going right. Making gratitude a daily practice will help condition your mind to appreciate what you have instead of seeking fulfillment through spending.