You don’t have to think or feel that way, thanks to a flexible approach to personal finance called conscious spending.
That doesn’t mean some age-old, general guidelines for saving don’t apply — like saving 5% to 10% of your income and having an emergency fund for three to six months, Sethi said.
But a conscious spending plan allows you to say, “Yes, I want to go on vacation. Yes, I like beautiful dresses. Yes, I will spend on these things without guilt. I will also invest, save and make sure I can pay my rent,” Sethi said.
Whether you want to save money, reduce debt, or have a little more fun, get you to spend consciously, you can use this approach today. Here’s how.
Rewiring your spending habits
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 unconscious eating,” he said. “We just don’t have a plan, we don’t really pay attention to it, especially when we’re using credit cards.”
The key to reversing 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 expenses like bills and rent? How much do I want to invest and save and why? How much do I want for impulse purchases or fees such as Put aside drinks with a friend or a parking ticket?
Your answers must be very clear, Klontz and Sethi said. Saying you want to be able to do what you want, when you want is abstract. But would you like to fly to Italy with your partner with more legroom, be there for three weeks and watch the sunset over Rome with a glass of wine? Well, that’s a vision that’s alive, specific, emotional and meaningful, Sethi said. “What is not meaningful is just a table with numbers in it. Honestly, no one cares.”
Answering these questions can help you feel enthusiasm and clarity about your finances, recognize what is less important to you, and live in alignment with what is important to you. “Then it’s a lot easier to cut in areas that aren’t as important,” 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 not influenced by what others think you should be doing.
A personal example: I recently decided that instead of spending several dollars on lattes a few times a week, I’d drink the free instant coffee at the office on weekdays. At the weekends, I treat myself to pampering myself with friends in cafes. I chose it because on weekdays more energy was my only reason for wanting coffee – while having money was more important to me in order to enjoy better coffee and a good time at my favorite cafes on the weekends. This is how I get what I want out of my coffee enjoyment by consciously concentrating on what is most valuable to me instead of restricting all coffee purchases.
If you’ve already consciously thought about what’s important to you, you don’t need to feel anxious, obsessed, doubtful, or guilty. When Sethi was a kid, his family couldn’t afford to buy appetizers at dinner, he said. These days, one of his “money rules” is to never spend money on appetizers because “it gives me great pleasure to be able to buy any appetizer that I see looks good,” he added. “I don’t have to decide: should I pay that much? Or shouldn’t I?”
If you want to give conscious spending a try, give it a try for a month. Then use your bank statements or a budgeting app to check what happened, what worked, and what didn’t.
“It won’t work perfectly the first time. It’s a system you’ll keep tweaking,” Sethi said. “But overall you will start to get a feel for how it works and what you need to change. And then just make the change every month after that.”