Why mindful spending is better than budgeting

Why mindful spending is better than budgeting

Financial stress can follow us everywhere. As much as we try to avoid it, that stress can seep into our work-life and disrupt our productivity. In order to reduce financial stress, we must proactively fight it with efficient money management.

Your immediate thought may be to create a budget. Budgets can be very useful. They provide a holistic view of your personal finances, allowing you to understand your money inflows and outflows. This is key to maintaining financial stability and growing your wealth.

However, despite their benefits, budgets alone can be counterproductive for the following reasons:

  • More financial stress – If you become overly money conscious, budgets can do more harm than good.
  • Unnecessary overspending – Budgets can lead you to spend your surpluses, or spend up to your limit, when you might not have otherwise.
  • Time consumption – Plain and simple, constant budgeting takes a lot of time.

The purpose of efficient money management is to reduce your stress, not compound it. Budgeting isn’t a scam, it’s just not always easy. However, there’s a better money management approach: mindful spending.

Solution: Mindful spending

It’s exactly what it sounds like: a disciplined mental approach to managing your personal finances. Mindful spending lifts the restrictions of budgeting. Instead of a spreadsheet commanding your life, telling you what you can and can’t do, mindful spending is a back-of-mind technique that doubles as a time-saver and stress-reliever.

What’s the difference?

Mindful spending is a lifestyle, while budgeting is a process to control your lifestyle. Both take discipline, but mindful spending doesn’t require as much of a time commitment.

What are some key principles of mindful spending?

  1. Recognize impulse buying

    Think before you buy. With the world at our finger tips, we can purchase anything in a matter of seconds.

    It’s can be challenging to realize you’re impulse shopping. The key is to condition yourself to think twice before hitting “confirm payment” or swiping your credit card. It takes practice and mental commitment.

    There are several precautions you can take to reduce impulsive purchases:

    • The Waiting List: each time you encounter something you want, add it to your waiting list and timestamp it. Once 30 days have elapsed, reevaluate whether you still want the product. If you still do, go ahead and buy! The time-delay helps eliminate the emotional impulse and forces you to be more logical.
    • Avoid Temptation: a surefire way to reduce your impulse buying is to stop putting yourself in impulse buying situations. Don’t use online shopping or browsing stores as a means of entertainment. It’s hard to avoid advertisements entirely, but if there are certain websites you continue to impulse shop on, consider blocking access to those sites as an extra safeguard.
    • Emotional Awareness: impulse buying is triggered by emotion.  Advertisements and fancy store displays are designed to capture our attention, target our emotions, and handcuff our wallets.  Companies offering “deals” will try to convey a sense of saving or discounted value. Keep in mind that $50 spent on a buy one get one offer is still $50 more than no purchase at all.
  2. Categorize purchases

    Purchases are either needs or wants. You need groceries, as food is necessary to live. You need to pay the rent or your mortgage, as shelter is essential.

    You want to go to concerts. You want to make a late-night ice cream run. You want a new smart phone.

    Categorizing each of your prospective purchases will help you determine if you should buy or walk away.

  3. Shopping around

    You have a lot of power as a customer. An integral part of mindful spending is shopping around for goods and services. Evaluate each of your options before you make a purchase.

    Car insurance? Shop around. Phone plan? Shop around. Hairstylist? Shop. Around.

    You’ll be amazed at how much you’ll save if you compare prices first. That being said, don’t use shopping around as an excuse to buy everything you see. Remember to focus on necessities, not spontaneous wants.

  4. Cash is king

    It might sound small, but utilizing cash as much as possible will limit your unnecessary spending. There’s a mental disconnect when you use a credit card for two reasons:

    • Plastic is a placeholder. You’re not actually handing over your hard earned money when you use a credit card. Swiping is much easier to forgive and forget.
    • Short-term debt. When you use a credit card, you’re buying something “on credit.” Again, you’re not physically exchanging your money for goods/services, plus you’re delaying the actual payment until your bill is due.

    Make cash a priority.  It’s more accountable!

Mindful spending + Monthly check-ins = Financial stability

Don’t turn your back on budgeting altogether. It can have shortcomings, but only if improperly executed.

At its core, budgeting is a good practice. Combined, mindful spending and monthly budget “check-ins” will allow you to live financially stress free.  Try this simple personal budget template for Excel, which includes formulas.

At the end of each month, assess your spending habits and make mental notes. If you’re over budget, determine what you spent too much on and keep that in mind. If you’re under budget, great! Your mindful spending is efficient.

Mindful spending creates financial awareness, and budget check-ins keep you accountable.

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