Unlock the secret to true happiness by educating yourself
What if I told you that the key to lasting happiness lies not in accumulating wealth, but in mastering the art of spending it? We can all agree that the world is driven by materialism and consumerism, so we tend to want more. But what if we could start spending money consciously instead of splashing out?
Conscious vs. Unconscious spending
Bradley Klontz, a financial psychologist and associate professor of practice at Creighton University’s Heider College of Business in Omaha, Nebraska, said that people do spend unconsciously. But what does it mean? As you might expect, this term is defined by thoughtless purchases made out of convenience or habit. You’re more likely not to realize what you spend your money on. To put everything in a nutshell, unconscious spending means no plan. Practically, you have no idea how to manage your finances properly, so you keep on buying useless items.
On the other hand, we have conscious spending. It means that someone is financially healthy since they have a specific income plan. They align what they spend their money on with their interests. They make money decisions based on their priorities and goals. For instance, somebody focuses on paying the bills and saving for retirement. It also includes setting money aside, which can be used for personal wishes (a vacation, a bigger apartment, etc.).
How can you make a conscious spending plan?
A conscious spending plan is a personalized approach that takes into consideration your values and preferences, giving you a roadmap for spending money based on priorities. This sort of plan can solve the problem of mindless spending and the inability to stick to a budget.
Steps to make a conscious spending plan:
- Step I – Have your own Q&A related to managing your finances
To make a clear plan, you need to have one thing in mind: everything starts with some questions. So, first things first, have a moment and think: Where has your money been going? How much do you spend on your bills, for rent? How much do you want to save and invest? Why? How much are you willing to spend on impulse purchases and spare time activities? What about school? Food?
Your answers are supposed to be extremely clear so that you can have a well-structured plan.
Why are all these questions so important? Well, when someone says “I want to have enough money to buy whatever I want, whenever I want” is childish and abstract. However, saying “I do want to visit The Faroe Islands with my family in 2024, because it has always been me and my mother’s dream. I have to start putting some money by. I will opt for a low-cost airline so I can spend more on accommodation, food, and souvenirs” is a vision. Not to mention the fact that it is meaningful as well, so the motivation is huge.
- Step II – Financial goals
They can be:
- Short-term goals (which can take a few moments to a few years) such as paying off a debit card
- Medium-term goals (usually take a few years to achieve) such as paying off a debt
- Long-term goals (take several years) such as paying off a mortgage
- Step III – Divide your expenses into different categories
- Required: rent, food, shelter
- Plans: savings, investments
- Most important wants: vacations, new furniture, entertainment
- Step IV – What makes you truly happy?
- Stop spending mindlessly and you will have enough money not to feel guilty when you pay for activities that always boost your mood such as concerts, city breaks and so on.
- Using coupons, minimizing dining out, canceling useless subscriptions, and not purchasing the latest styles every single season will definitely enable you to prioritize spending on all these things that relax and make you happy and excited.
The 24-hour rule
When you go shopping, there is a high chance of buying items that captivate you for a moment, but, in fact, you are not as “in love with them” as you might believe at first. It sounds familiar, doesn’t it? A great tip to prevent yourself from wasting your money is to wait 24 hours before purchasing something that you perceive as a real spark. Why? Because, normally, we feel tickled pink about a particular item for less than 24 hours. However, if you keep on daydreaming about that silky dress from a fashion boutique or maybe you can’t get a nice pair of boots out of your mind, they are worth buying, so go on!
Conscious spending refers to managing your income but not focusing on restrictions. Its purpose is to help you save money without making you feel as if you gave up on your wants. It prioritizes your goals. Consequently, you are much more likely to make decisions that feel more in tune with your dream future.
Probably, the main difference between budgeting and a conscious spending plan is the strategy. Spending consciously requires a long-term plan of action, but budgets mean money management from day to day. While a budget helps you map out your key expenses and plan for the weeks and months to come, a financial plan allows you to set a course toward funding financial goals that are 5, 10, or 20 years down the road. A good financial plan may address your income and expenses, taxes, insurance, estate planning, retirement, education needs, and other topics.
Conscious spending can be more effective than budgeting because it gives you freedom and flexibility, whereas budgets are restrictive. Constantly focusing on a budget leads to looking backward a lot. On the contrary, a conscious spending plan enables you to look forward, because it makes you intentional with your money(You are aware of the fact that you must spend on your needs and put money aside first) and then you can spend on the things which make you truly happy, without feeling guilty – because you know that your needs are covered and you also have money aside.