For some people, sticking to a budget is a helpful way to guide spending and provide a framework for saving. Budgets are not for everyone, however. Some people do not like feeling restricted or guilty about making purchases outside of their budget. If you are in this boat, perhaps you would benefit from a different approach to financial responsibility called conscious spending.
Budgeting is a retrospective take on spending in which you look at where your money has gone and create a plan for where it needs to go to meet financial goals. Conscious spending, on the other hand, looks to the future and allows you to identify specific personal goals. You can divert money toward these goals from spending areas that are less of a priority for you.
Figuring out How to Spend Your Money Intentionally
Conscious spending allows you to spend on certain things without feeling guilty provided that you restrict costs in other areas. This approach is all about being intentional with your spending so you can live in the moment without feeling guilty. Importantly, conscious spending requires that you follow important guidelines for savings. For example, you should still have an emergency fund of cash that will cover at least three to six months’ worth of expenses, and you should still save a certain portion of your income for retirement and other long-term goals. However, you can also identify the expenses that make you particularly happy, whether that is taking frequent vacations or wearing nice clothing. You can spend money on these things while still investing appropriately and saving enough for the future.
The term conscious spending comes with the implication that there is also spending that is unconscious. In other words, you may spend without a plan or without paying attention to where your money is going. This is especially easy when it comes to using credit cards to cover purchases. However, conscious spending forces you to think about the spending that makes you happy. Then, you divert your discretionary money each month toward these goals. An important part of conscious spending is setting specific goals. Instead of diverting your discretionary spending toward vacations in general, make a specific plan, such as going to Santorini for a week to disconnect from work.
Identifying the Things You Value Most in Your Life
With conscious spending, you do not always have to identify lofty goals like an expensive vacation. Instead, you can focus on something as simple as buying an expensive latte. If drinking fancy lattes makes you happy, perhaps you can identify specific situations for splurging. For example, instead of purchasing lattes every day before work, maybe you drink the coffee provided at the office during the workweek and then allow yourself fancy lattes on the weekend when you can relax at the cafe and do some light reading as you enjoy them. Or, if you need the latte to get through a hard workweek, maybe you avoid coffee altogether on the weekends or just make it at home.
The point of conscious spending is to move away from a spreadsheet with random numbers. Instead, you focus on the things that you want and make you happy, which then motivates you to make the cuts necessary to achieve those goals. Traditional budgeting often focuses on what you shouldn’t have, whereas the focus of conscious spending is on what you want. That way, you do not have to feel guilty when you splurge.
Your conscious spending plan is unique to you and should not be influenced by what other people are doing. When you follow trends, you can regret ignoring what your heart wants and end up feeling deprived. With conscious spending, you pay attention to your heart alone and give yourself what you need to be happy.
Refining Your Conscious Spending Habits over Time
Importantly, conscious spending is not something that automatically works out of the gate. Just as with budgeting, you need to review what works and what does not. Try conscious spending for a month. At the end of the month, review how much you spent, how much you saved, and how paying your bills went. You will almost certainly need to make tweaks to your approach, but this is part of the learning process. Over time, you will grow more accustomed to how much you can spend on the extras and still meet your other financial goals and obligations.
Perhaps, in the end, you cannot afford that expensive latte each workday. Maybe you find it works best to get a latte on Mondays to get you started for the week ahead or one on Fridays to celebrate the end of the workweek. Or maybe you decide that drip coffee from the office is fine because you want to save your money for a big, celebratory cruise at the end of the year. The point is to focus on what will keep you motivated and what will make you the happiest. That way, you never feel like you are depriving yourself by setting austere and, frankly, somewhat arbitrary limits to your spending.