While money can be something we think we just need more of, how you use it makes all the difference. If you understand your needs, you can set better goals and cut spending through conscious decisions. Ultimately, being more mindful with your spending will transform your relationship with it. This frees up more cash for what’s really important to you. This means more control, more doing what makes you happy, and greater fulfilment as you achieve your financial goals in 2018 and in the future.
What is mindful spending?
Today’s world is built for convenience. We’ve got contactless, mobile payments and the ‘would you like to save these card details?’ question to contend with. With all this, it can be really easy to spend without thinking. This leaves many of us at the end of the month with little to show for our pay cheques wondering where in the world all our money goes.
Developing mindful spending habits simply means being much more conscious of how you're spending.
There are 3 broad ways this sort of mindset can help you take control of your finances and build better spending habits:
1) It allows you to take stock of how you tend to spend your money
2) It helps you to define your financial goals and focus your attention (and money) on them
3) It can help you think before you tap that card, cutting out those purchases you tend to regret and freeing up more money for your savings and the things you love.
Step 1 - Put your spending under the microscope
Start by focussing on how you tend to spend. This way you can identify “bad” habits you might not have been aware of.
Start by listing your expenses. These include essentials such as rent and utilities, and other expenses like your Spotify subscription or gym membership. Make sure you don’t miss anything by going through your latest bank statement.
The next step is to record your day-to-day spending. The average Brit spendson coffee and snacks — money many of us don’t factor into our budgets. It’s worth tracking your everyday spending to find out what it looks like. You can do this by writing everything down or by using an app such as or .
Step 2 - Take stock
After a couple of weeks of tracking your expenses, you should be ready to crunch some numbers. Is your total spend more or less than you expected? Are you spending more than you’d like on certain things? If there's anything in there that you regret, it could be worth thinking back to the day you bought them. Was it a spontaneous purchase? Did you only buy it because you were having a bad day? Thinking about these things might help you see patterns in your spending that you can change.
Step 3 - Get your priorities straight
Now you know where you actually spend your money, it's time to move towards making sure that matches up with where you want your money to be going. When it comes to developing more mindful spending habits, it's all about channelling your funds into your 3 priority areas: bills, savings and the things you really love.
Here's some tips to help you prioritise your budget:
Define your essentials (bills)
Your rent or mortgage and other bills are unavoidable and should be your top priority. It’s worth keeping the money for them in a separate account, so you won’t spend it by mistake.
Get smart about saving
Saving money is one of the best things you can do to- so if possible it should also be one of your top priorities. It's often said that you should aim to save around 20% of your income.
Budget for the things you love
With the money that's left, make sure to allocate money for the things that make you happy. A common mistake is to cut down on things you care about when budgeting. In reality, this can make you feel like you’re making too many sacrifices, making it much more likely that you'll slip into old habits.
Instead of cutting out the things that add real value to your life, those non-essential takeaways (or is this just us?) can become a prime candidate for an area to cut back in, without sacrificing the real pleasures in your life. So if you’re a keen cyclist or foodie, setting some money aside each month for cycling gear or nice meals out, will help you better afford the things you love and keep your budget in tact. But try to be quite strict with yourself here – not everything can be a priority.
Step 4 - Build your habit
Now that you've got a clearer picture of where you want to channel your funds, it's time to make sure you stick to it. Here are some tips to help you get into the habit of spending more mindfully:
Go old school and pay in cash
According to a, paying in cash activates your brain’s pain receptors, making it harder to part with. So, using it for all day-to-day expenses can help you get into the habit of making sure you're thinking twice before you buy.
Have a no-spend day
Pick one day a week when you can’t spend any money. Try cycling to work, take your own lunch and stick to the office coffee. Even better, turn no-spend day into a friendly competition with colleagues or friends and see who saves most. If you crack you have to bring in cake. This can help you kick the habit of unnecessary spending.
Give yourself some encouragement
Changing your spending habits and relationship with money can be tricky so it's a good idea to give yourself as much motivation as you can. Keep your goals in mind – if you’re spending on something that isn’t a priority to you, put it in terms of what you do care about. E.G. That expensive lunch equals fewer drinks on the beach in Spain. You may find you change your mind.
It's also important not to be too hard on yourself. If you accidentally have a spendy day or week, don’t beat yourself up over it. Just work out what happened and start again the next day.
This step is all about helping make sure your day-to-day purchases reflect the budget and priorities you've set out in the steps above.
Step 5 - Think about areas where you can cut back
If you're going to be channeling more funds into your savings and other priorities, you may want to cut down in other areas to help stretch your pennies.
Look back over your spending and see if there are any purchases you frequently make that you could cut out or cut down. For example: cutting back on those non-essential Uber trips, switching supermarket or bringing your own (much tastier) lunch to work will all free up some extra cash to channel into your savings or your hobbies. It’s also worth checking if you can save on larger expenses - for example switchingor seeing if can help you save.
Once you're in the habit of being more mindful about your spending it will become easy and hopefully you'll never regret a purchase again.