Money is one of the most common sources of stress in people's lives, and it's often because we feel like we don't have enough.
But what if there were ways to get ahead without depriving ourselves or going into massive debt?
Conscious spending is the answer. It's a way of living that involves being mindful about every purchase you make and only spending money on things that add value to your life.
What is conscious spending?
Conscious spending is a mindset that encourages you to think critically about all of your purchases, making sure each purchase has actual value for you.
Instead of seeing conscious spending as a way to deprive yourself, think of mindful spending to stretch your money further by spending it on things you will use.
A conscious spending plan is not the same thing as a budget. Instead of depriving yourself of items you want (or even need), it knows what to prioritize and how to spend your money in a way that matches your values.
How do I create a conscious spending plan?
So are you ready to embrace conscious spending? The first way is to start with making a deliberate spending plan.
The first step to creating a conscious spending plan is to think about your values and fit into mindful spending. For instance, maybe you value experiences over things or have enough money to take spontaneous vacations with friends. Decide which components in conscious expenditures are most essential for you.
Next, set goals that align with your conscious spending plan and respect your values. For instance, if you value-conscious spending over having lots of money in the bank, maybe your conscious spending plan is to spend on experiences rather than buying things.
Next comes identifying fixed costs that don't align with conscious spending. These items you may think you need every month but don't provide any real value to your life. For instance, you might find that your cable bill isn't providing value, and it means it's time to cut the cord. The same goes with magazine subscriptions or any other recurring expenses that are no longer important to you.
Finally comes identifying opportunities—these are things that help you achieve your conscious spending goals. If mindful spending is one of your top priorities, this could be something as simple as buying groceries at your local farmers' market instead of making a trip to Whole Foods.
What are the 5 categories of spending?
Now that you have a conscious spending plan in place, it's time to think about the different ways you spend your money.
There are five categories of spending that you should keep in mind when creating a conscious spending plan.
1. Fixed costs
This is spending on rent, utilities, and insurance premiums that are important for your quality of life. However, you can save significant money by adjusting your fixed-costs plan that aligns with conscious spending principles.
For example, if you live in a two-bedroom apartment and only use your spare bedroom once a year when your parents visit, then explore moving to a smaller space or getting a roommate.
Maybe you have a car that you don't use every day. It may be cheaper to get a taxi or rent a car when you need one versus paying a car note and insurance on a vehicle you don't use.
2. Essential expenses
These are items that provide immediate value in addition to your conscious spending plan. For instance, if mindful spending is essential for you, this could be things like groceries or gas on the way to work.
3. Preferred expenses
These items provide value but don't fit with conscious spending principles (for example, you can probably think of ways you spend money on things that don't align with mindful spending, like impulse buying at the grocery store).
This is anything that helps you achieve your conscious spending goals. This could be something as simple as choosing to shop at thrift stores instead of department stores or buying products produced by companies with conscious spending principles (for example, organic food or fair-trade coffee). Opening yourself up to different opportunities and ways to spend your money can help you find ways that align better with your lifestyle.
For example, I love designer dresses but instead of spending hundreds and thousands on something that I am only going to wear once I rent my outfits from Armoire Style.
Savings should also be one of the critical components of conscious spending. Savings accounts help you think about how much money you have in the future rather than concentrating on what's happening today. You can save for short-term goals like traveling or long-term goals like buying a home, all while staying conscious about your spending.
Do you have a specific goal in mind? Maybe you want to buy a house, retire early or save up for a dream vacation. Whatever that goal is, conscious spending is one of the first steps to getting where you want to go. Make a list of those goals, and think about how they will make you feel once you achieve them. Then based on that, you can allocate a certain amount to put towards saving for that goal. The things that bring you the most excitement and joy will be the things you will focus on first. Everything else can either be moved down the list or even eliminated altogether. The key is to make sure that it is aligned with your goals and what you want.
With these five categories of conscious spending in mind, you're well on your way to mindful spending habits that will positively impact your life.
What is unconscious spending?
Conscious spending is conscious about your spending, and it's a way of living that involves thoughtful decisions around where and how you spend money.
On the other hand, unconscious spending is spending based on emotions or habits without really thinking about it. You might find yourself assuming that you don't have enough to pay for something, so you'll just charge it. Or, if you have a certain amount of money in your checking account, you might assume that's enough to cover the cost of purchase without really giving thought to it. But if you're not aware of how much you have and how much you're spending, it is easy to go over your spending limits.
While the goal is to swipe without worry that you're going to go into overdraft, conscious spending is all about conscious decision-making. You know why you're buying what you're buying and whether or not it's aligned with your deliberate spending strategy.
What are the 6 steps to a winning spending plan?
So are you ready to create your own personalized conscious spending plan? Here are 6 easy steps to get you started.
Categorize your current spending:
Before creating a conscious spending plan, it's essential to understand how and where your money is currently being spent. Start by making a list of all your monthly outflows, including:
– fixed expenses (rent/mortgage payment, insurance)
– variable expenses (groceries, transportation)
– discretionary spending (eating out, gym membership)
If you use a debit card or credit card, you might be able to export this out of your bank's budgeting app. Otherwise, you can just use a plain piece of paper and write everything out.
Connect your spending to your values:
Once you have the data in front of you, take some time to reflect. Where does your spending match up with your conscious values? Is there anywhere it doesn't? For example, if one of your conscious values is living environmentally conscious, maybe getting that monthly manicure doesn't line up. The same goes for this month's car payment, and that might not align with your conscious values of independence and freedom.
After reflection, keep the list somewhere you can see it to remind yourself where you want to spend more mindfully or cut back spending in places that don't align with your conscious values.
One thing I really love doing is having a conversation with my future self. I like to imagine I'm in a few years, and I've reached all of my conscious spending goals for the month/year. What that looks like will come from your conscious spending values.
Ditch the budget and start with a conscious spending plan instead:
While conscious spending is often part of the broader mindful spending movement, most conscious spending plans are actually more flexible than traditional budgets. Creating a conscious spending plan is not the same as creating a budget. Instead, it's an approach to personal finance that focuses on aligning your money with your values and wants, rather than depriving yourself of things you love in the name of savings.
A conscious spending plan is different from a traditional budget because it doesn't specify how much you'll spend on certain things each month. Instead, conscious spending plans are flexible and can change as your values or financial situation changes.
A conscious spending plan gives you the freedom to prioritize what's most important to you and helps you develop and grow healthy financial habits.
Creating spending goals:
Spending consciously is all about what you value and want, so it's essential to align your conscious spending plan with these conscious values and desires.
For each month, take some time to think about how much money you'd like to spend in different areas that correlate with your conscious spending values:
– nightlife/social outings
– personal care
…and so on. I like to think of conscious spending goals as conscious buckets. Each conscious bucket is filled with money that can be spent on anything you fancy, just as long as it fits into the conscious bucket category.
If you need help, check out our mindful money journal. This will help you keep track of your spending and create a plan that will be better aligned with your values and the things that are important to you.
Set up your automated system:
Now that you've got your conscious spending goals, it's time to create an automated system. This means that each conscious bucket is covered by automation (i.e., the conscious buckets are funded automatically). This eliminates any other decisions you might need to make regarding mindful spending and allows you to live within your conscious spending plan.
First, choose which conscious priorities you want to invest in each bucket to create conscious spending buckets. Let's say you have three buckets. Emergency Fund, Credit Card Debt, and your retirement accounts. Identify how much you want to contribute to each bucket and set up automatic transfers with your financial institution.
Automating your personal finances is a great way to quickly reach your savings goals. The set it and forget it model means you save more money and spend consciously.
Keep Track of Your Spending
You don't have to do this every day, although you might find yourself doing it more often when you first start out. But it is good to check in at least once a month to see how things are going. How does your spending look? How are you're savings goals coming along? Is there anything you need to change or tweak? Are there any old habits that are creeping their way back in that you want to change? The more you practice conscious spending, the more you will sense what is really important to you versus not. You will no longer feel bad about spending. If anything, you will feel better about how you choose to spend your money.
Creating a guilt-free conscious spending plan
A conscious spending plan is a great way to ensure that your money is being spent according to your values and wants. It can also help you develop healthy financial habits and reach your savings goals. Automating your personal finances makes it easy to stick to your conscious spending plan, and keeping track of your spending will help you stay on track. With a deliberate spending plan, you can have the freedom to spend your money however you want while still staying mindful of where it's going.