I am thrilled to welcome Mindy Crary to Bump Life today. Mindy in a financial planner who coaches her clients on the art of conscious spending. I have been following her blog for while and every post I read, I love her more. She gives great, straightforward advice and practical tips you can start using today. Today’s post is no exception. Read on to learn and be inspired…I know I am! -megan
Guest Post By Mindy Crary
One of the most difficult issues parents face is balancing short term financial needs—feeding your children healthy food, paying for enrichment activities, day care (and clothing the little bean sprout)—with mod-to-long-term goals like getting a bigger home, a new car, and, oh yeah, retirement and college. Especially when children are younger, it often feels like there isn’t enough money to go around. And often, there isn’t . . . that’s just life and balancing priorities.
Many people jump to budgeting as a solution when they feel the need to cut back to make their lives work. But budgeting is a lot like dieting—it might yield some immediate support, but actually prevent us from succeeding in the long-term. Why? Because budgeting prevents us from reaching the ultimate goal of spending consciously.
Budgets can be very motivating when you think you’re making changes that will increase cash flow immediately. The problem, however, is that real life intercedes and forces you to abandon the budget when you exceed the limit or forget to include a specific expense.
Four Steps To Better Spending
You can’t make lasting change until you’re crystal clear about the current situation—which is why I advocate conscious spending. This is the belief that once you examine your habits and understand where you derive the most enjoyment, you can actually better utilize every dollar.
When I got serious about tracking expenses many years ago, I was shocked to discover that I spent over $150 monthly at Starbucks! But rather than simply slashing that expense, I chose to be conscious about change. I was able to establish a new “normal” while never feeling deprived. There four steps to conscious spending:
1. Gain clarity. You must track your cash out flow—a distinction that often gets lumped in with budgeting itself, but tracking gives you more awareness BEFORE you attempt to cut back. One way to achieve this awareness is simply to review the Trends tab in www.Mint.com.
2. Decide perceived value. Perceived value is your “gut” number. Most people have a built-in barometer that tells them if they are over spending in an expense category. It’s subjective for each individual. When I saw the facts of my coffee habit, I immediately realized that although I was spending $150, I was NOT receiving $150 of perceived value. There were many things I would enjoy more than $150 worth of coffee and pastry!
Some might say, I got to the same end result of budgeting; cutting back on a “fun” expense. But if you had told me to just to cut back, the cutback would have been an arbitrary number, rather than an informed decision. And if it wasn’t my conscious decision, I would have felt deprived.
3. Distill the experience. I’d never eliminate Starbucks; that was certain. So I needed to break down all aspects of the “experience” to figure out what was essential to my enjoyment. I realized that I didn’t care about the pastry, so that could go with no regrets. What ultimately became my new “normal” was a drip coffee on weekdays . . . and I was perfectly satisfied as long as I could still go hang out and work. Sitting in Starbucks was the most meaningful aspect of that spending experience.
4. Track the new normal. After a couple of months of experimenting and deciding what worked for me, I realized that I could allocate $40 toward coffee and be completely satisfied. Only at this point did I actually set up a single budget item in Mint, so that if I went over $40, I would be alerted, and could figure out what went wrong. Going over budget usually was a reminder to return to consciousness—much like how a meditation practice doesn’t help you achieve 100% stillness, but helps you learn return to the practice, so that over time, you can let go of your thoughts more easily.
The goal of conscious spending isn’t to limit anyone, but instead help people increase awareness about how they are behaving in everyday life. When you start to break down your experiences to achieve the most satisfaction from your spending, you add MORE to life, not detract from it. We really can have just about anything they want; the key is to be completely conscious about what those things are.
Action Steps To Take
- Start tracking your spending to gain clarity on exactly where the money is going. Again, Mint is my favorite!
- Pick an area where you can cut back (it’s usually obvious, but if not, enlist help to get some feedback!)
- Commit to 3 new behaviors to lower expenses – for say, cutting back on your grocery bill, the steps might be something like:
- Create 2-week menu plan
- Cut back on trips to the store
- Commit to 1-2 days per month of bulk meal prep
- Commit to sticking to this change 75% of the time; this means that 3 weeks out of 4, 9 months out of 12 or whatever time length you find personally motivating is what you’ll use when you feel like stopping.
Now it’s your turn: What are some ideas or challenges you can share that will help others spend more consciously?
Mindy Crary (MBA, CFP® practitioner and financial coach at Creative Money) helps you become a lot more educated (never inundated) about not just your money — but the whackjob behind it. Go to Creative Money and download the free ebook Getting Started With Conscious Spending.