Mindful Spending Part 1: Do You Know Where Your Money Is Going?
- Not knowing where your money is going can cause both financial and physical problems.
- Mindful spending is a good way to get back in control.
- It starts with getting reacquainted with your spending and saving patterns.
Recently, I participated in a 30-day food cleanse. It took discipline and control, of course. But I came away from the experience feeling better, stronger and generally much healthier. And it made me aware of unconscious eating habits that really weren't doing me any good. So what does this have to do with finances?
Well, it got me thinking about how unconsciously many people spend money. My food cleanse taught me to pay attention and eat mindfully. So I thought, why not pay equal attention to our finances and learn to spend mindfully? As a result, I've developed a 30-day financial cleanse that focuses on what I refer to as a journey to "mindful spending."
Interested? I invite you to join me over the next four weeks as I delve into ways to control spending and enhance financial health.
Why we should pay closer attention to our spending habits
There's clear evidence that our financial and our physical health go hand in hand. A recent study by the American Psychological Association found that financial stress leads to a whole range of serious physical problems—from heart attacks to ulcers to migraines to depression. It also found that financial stress impacts three-quarters of us.
And it’s no wonder people are stressed. A recent study commissioned by Bankrate revealed that more than 60% of us don’t have the rainy day funds to deal with a $500 emergency. In 2015 the Government Accountability Office reported that about half of American households age 55 or older have no retirement savings. This is serious.
Three steps to mindful spending
To me, mindful spending is an antidote to financial stress. It doesn't have to be hard. You just need to refocus on where your money is going—and where you want it to go. Your journey to mindful spending includes three straightforward steps:
- Get yourself reacquainted with your spending and saving patterns.
- Think about your short- and long-term goals.
- Put these two things together, and start to make the changes that will align your spending with your personal priorities.
Putting it into practice
To help you focus on your own journey to mindful spending, for the next three weeks, my columns will include three simple to-do's. This first one has to do with keeping track of everyday expenses.
For instance, do you know how much you spend on incidentals during a typical week? Things like morning coffee, cab rides, or lunches out? If you're like most people, a lot of your spending is done kind of automatically. You may have a general idea of where your money goes, but because it's so convenient to pay for most everything with a credit card, it's easy to lose track of how those expenses add up.
So I suggest that for 30 days, you make a commitment to use cash for those everyday expenses. First, plan your day-to-day spending for a week, then go to the ATM and get cash to cover them. Taking this a step further, write down every cash purchase in whatever way is easiest for you. Some people like to carry around a little notebook; others might use an app. You can also use an online tracker. Finally, see where you might be able to cut back. With a heightened awareness of each expenditure, you may quite naturally make better spending decisions.
Interestingly, a colleague and her husband recently did this exercise for several months and found that the very first month they saved an impressive amount of money.
Of course, there's more to mindful spending than just getting on top of your day-to-day expenses. You also want to look at your total monthly budget, review your goals, and be honest about whether your money is going where you want it to go. And you need to make a commitment to make changes where necessary.
I completely understand that knowing you should do something and actually doing it are two very different things. That's where my 30-day financial cleanse comes in. It's a step-by-step program with tips and information to help you get going and keep going. If you want to participate, you can download our 30-Day Financial Cleanse Quick Start Guide. I also encourage you to join our online community and share your own experiences on my Carrie Schwab-Pomerantz LinkedIn page and on Twitter at @CarrieSchwab using the #FinancialCleanse hashtag.
And in the coming weeks, I'll be talking about other ideas and practical ways you can make the journey to mindful spending. Stay tuned …