Conscious spending: personal finance that’s smart and fun

You don’t have to think or feel that way, thanks to a flexible personal finance approach called spending wise.

“Unlike a budget that looks backwards, a conscious spending plan allows you to look ahead,” said Ramit Sethi, author of the bestseller “I Will Teach You To Be Rich” and CEO of the blog of the same name. “Spending wisely is all about spending extravagantly on the things you love, as long as you cut back mercilessly on the things you don’t. It’s not about restrictions. It’s about being intentional with your money and then spending it to the things you love guilt-free.”

That doesn’t mean some age-old, general guidelines for saving aren’t valid — like saving 5% to 10% of your income and having a three to six-month emergency fund, Sethi said.

But a conscious spending plan allows you to say, “Yes, I want to go on vacation. Yes, I like nice clothes. Yes, I’m going to spend guilt-free on these things. I’m also going to invest, save and make sure I can pay my rent,’ said Sethi.

Whether you’re looking to save money, pay off debt, or have a little more fun spending consciously, you can take this approach starting today. Here’s how.

Rewire your spending pattern

The term “conscious spending” implies that people experience unconscious spending, said Bradley Klontz, a financial psychologist and associate professor of practice at Creighton University’s Heider College of Business in Omaha, Nebraska.

“It’s almost like eating unconsciously,” he said. “We just don’t have a plan. We don’t really pay attention, especially with credit cards.”

The most important thing in undoing unconscious spending is to ask yourself specific questions about your financial goals and life aspirations: Where did my money go? What do I like to spend money on and why? How much do I need for fixed costs, such as bills and rent? How much do I want to invest and save, and why? How much do I want to set aside for impulse purchases or expenses, such as a drink with a friend or a parking ticket?

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Your answers should be very clear, Klontz and Sethi said. Saying that you want to be able to do what you want when you want is abstract. But suppose you and your partner want to fly to Italy with more legroom, visit for three weeks and watch the sun set over Rome while sipping a glass of wine? That’s a vision that’s vivid, specific, emotional and meaningful, Sethi said. “What doesn’t make sense is just a spreadsheet with numbers in it. Honestly, nobody cares.”

By answering these questions, you can gain excitement and clarity about your finances, identify what you care less about, and live according to what’s important to you. “Then it’s a lot easier to cut into areas that don’t matter as much,” Klontz said.

Your answers to these questions form what Sethi calls your “rich life”—your life and financial goals that are unique to you and unaffected by what anyone else thinks you should be doing.

A personal example: I recently decided that I would drink instant coffee for free on weekdays in the office instead of spending a few dollars on lattes a few times a week. Weekends would be when I allow myself to enjoy coffee shops with friends. I decided this because on weekdays more energy was my only reason for wanting coffee — while having money to enjoy better coffee and quality time at my favorite coffee shops on weekends was more important to me. In this way I get what I want out of my coffee drinking by consciously focusing on what is most valuable to me, instead of limiting all coffee purchases.

If you’ve already consciously thought about what you value, you don’t have to feel anxious, obsessed, doubtful, or guilty. When Sethi was a kid, his family couldn’t afford to buy snacks while he ate out, he said. Today, one of his “money rules” is to never hesitate to spend money on appetizers, because “it gives me great joy to be able to buy any appetizer that I look good on,” he added. “I don’t have to decide, ‘Should I pay that much? Or not?'”

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If you want to spend consciously, try it for a month. Then, using your bank statements or a budget app, see what happened, what worked, and what didn’t.

“It won’t work perfectly the first time. It’s a system that you’re going to adjust all the time,” Sethi said. “But in general, you start to get an idea of ​​how it works and what you need to change. And then you adjust the change every month after that.”

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