Just about everyone has that one friend who seems like they always have money for traveling and eating out at expensive restaurants, yet they have no debt and are able to save up money. They don’t have a high income. What’s their secret? Maybe they adhere to the principle of conscious spending.
What is Conscious Spending?
Conscious spending, as the name implies, involves knowing how you are spending your money and only spending money on things that you truly need or that will truly add value to your life. Many people unconsciously spend money on things they don’t even like.
A simple glance around one’s home or office will probably reveal items that were purchased but are never used. How often have you looked at something that you have purchased and then asked yourself, why in the world did I buy that? Think about where your money is going. Maybe you have purchased gym memberships, magazine subscriptions, and subscriptions to online streaming channels. How many of them do you actually use?
Conscious spending involves tracking what you spend your money on. If you do this for just two days, you will probably notice many things that you are spending money on almost unconsciously. Many people purchase because of habit as opposed to whether or not they want or need something.
Examples of Conscious Spending
At its core, conscious spending is spending your money on things that are important to you while cutting back on things that are unimportant. Before purchasing something, a conscious spender will ask, will I ever use this item? If the answer is no, then they don’t purchase it.
A conscious spender will ask, can I get this cheaper somewhere else? This could mean going to a thrift store or comparison shopping to find the same item on sale or at a lower price.
A conscious spender will ask whether they can wait to purchase an item. Many conscious spenders avoid impulse buying by using the 30-day rule. If they want to purchase something, they will write it down on a piece of paper and then will consider it for 30 days. If at the end of 30 days they still want the product, then they will purchase it.
A powerful motivator for conscious spenders is whether there is something more important they want to spend their money on. Conscious spenders have goals. It may be to get of debt, it may be to purchase a new vehicle, or it may be to travel. By reminding themselves of their priorities, they can make conscious decisions that help them avoid foolish spending.
How Not Buying Today Can Protect You
If you choose your purchases wisely, you will have more money to save in case of dire unforeseen events. These are the events that would otherwise require you to use your credit card.
Emergency expenses are not one-time costs. For example, you know that every year you have to pay your taxes. You may not know exactly how much this will cost, but you know that you have to pay something.
There are other unexpected scenarios that can come out of the blue and catch you at a time when your savings account is not fully prepared. To make matters more stressful, you might have poor credit due to previous financial decisions. If you are seeking short-term financial options to get you out of this pinch, you may want to look for the best installment loans for poor credit.
It could be that you and your spouse both lose your job simultaneously. You may face a major medical catastrophe. Or there may be a large medical bill that your insurance company refuses to pay. These are unpredictable emergencies. This is what the money that you saved with conscious spending be used to cover. In the event of a life-threatening medical emergency, selling your life insurance policy for a cash payout via viatical settlement can help alleviate the financial stresses that come with medical bills.
In an emergency, getting a loan is a last resort. If you need to get a loan, your financial focus should be repaying that loan as quickly as possible and getting back to saving for your future.