Mindful Spending in Practice

As the name of our business suggests, we approach personal finance using a mindful approach that considers the returned value from what you are spending, whether your spending ties in to your values and moving you closer to your definition of living a meaningful life, and the opportunity costs of your spending. Mindful spending makes sense on the surface (think before you buy), but there are nuances in the actual practice of mindful spending that took us a while to figure out. Today we’d like to take a look at how we ourselves mindfully spend, and would love for you to share your mindful spending tips.

Thinking Out Purchases

In the book Your Money or Your Life, co-authors Vicki Robin and Joe Dominguez stress the concept of “life energy”. Life energy consists of the resources (time, effort and sacrifices) that you have traded for money, most likely from working. The book equates the two items, meaning that when you buy something you are not just spending money, you are trading your life energy for what is being purchased. As an example if you worked for $20 an hour and were looking to purchase a $100 item, you would ask yourself not whether the item is worth $100 to you, but rather 5 hours of your life energy. Putting spending in these terms helps the trade offs play out in your mind and puts a different spin on value, making it a bit easier to figure out whether “the juice is worth the squeeze”.

In addition to thinking out the life energy you would trade away for a particular item, we also try to think out if the item or service will be removing a significant pain point in our everyday life or if it is just adding to luxury. We get much more value out of the permanent removal of a pain point, while adding luxury might be nice for a little while but the feeling eventually wears off and brings greater temptation of adding more luxuries. For instance, we recently spent around $200 for a robovac to try keep up with Bailey’s shedding, and while we still take out the regular vacuum every now and then it has freed up so much of our time and keeps the house much cleaner on a regular basis with little effort. On a smaller scale, we spent $5 for a food masher that we use for potatoes and avocados, making a previous pain point of fork mashing a thing of the past. These are the kinds of things we look for in all of our purchases, rather than just a short-term high of purchasing an item just because there’s a specific brand associated with it.

We also try to see if a particular need can be met without necessarily buying anything. Would we be able to save on a particular project by just sucking it up and doing the work ourselves? Do we have unused clothing or shoes that could be used as “new clothes” for the event that we have coming up? Can we just borrow this item from a friend since we’ll probably only need it once? Are there free activities being offered that would be just as fulfilling to us as paid activities? Can we exchange services with someone for things such as dog-sitting? These are just some examples of questions we ask ourselves and think through before throwing money at a problem, and asking these questions will change your mindset when it comes to buying.

Restraining from Impulse Buying

Thinking out a purchase means having a system in place to prevent impulse buying. Companies like Amazon and their “1-Click Purchase” button try to set up the easiest and most convenient system of purchase not just for customer satisfaction, but to also shorten the distance between themselves and your wallet. Likewise, hundreds of billions dollars are spent every year in the United States alone on advertising. Ads come at you from all over the place; from your phone, to your podcasts or the radio that you listen to in the car, to the TV we watch and so many more forms of media. This is why it’s crucial to have a system to filter out all of this noise and decide what is definitely needed.

I am a big fan of making lists for purchases. I make weekly lists for grocery shopping, and I also have a running list of things that I have been thinking about purchasing. If the item is over around $20, I almost always keep the item on my list for a couple days to be able to think out whether the purchase will really relieve a pain point and if this pain point can’t be fixed with a more cost-effective or non-monetary option. I then have a rolling amount of budgeted discretionary spending money, and I only go through with the purchase if I have enough discretionary available. For example, if I had set aside $600 discretionary spending for the month, I would add $20 per day ($600 / 30 days) for the amount I would allow myself to spend. So if there was a $50 item I wanted to buy at the beginning of the month, I would force myself to wait until the 3rd day of the month to make the purchase. This helps me pace my spending for the month along with giving me extra time to consider the worthiness of a purchase.

My most recent spending experiment involved designating certain purchases as a reward for keeping other good habits in place. Along with the criteria mentioned above, I would also add in certain requirements that stated that habits associated with improving my health would be maintained before I could buy a particular item. If there was a widget I was interested in buying, and I set health goals of three gym workouts during the week, running twice a week and getting 10,000 steps for seven days, I would attach these goals to the particular widget. This way I could be rewarded for maintaining my habits and keep an incentive for the health habits to be maintained.

Evaluating Alternatives

Picture a particular item you want to buy. You’ve decided this item will be removing a pain point and you’re okay with the trade in life energy for the removal of said pain point. There’s not really any way to remove this pain point without this particular item and you’ve ruminated on this item for multiple days. You’re ready to buy, however the sheer amount of options available is overwhelming.

When this happens to us, there are a few things we do to narrow down the options and ease the overwhelm: we prioritize value over cost, we try to filter out costs only attributed to branding and not the substance of the product, and we limit our shopping around to a preset number of items or places.

Prioritizing value over cost focuses on what you are getting for the money paid rather than what’s the cheapest option. If we are looking at two refrigerators and notice that one is $1,000 and one is $1,400, we might be tempted to go with the cheaper one. However, when we see that the average useful life of the first refrigerator is 20 years while the second is 30 years, it would make more sense from a value perspective to go with the second option as we’d be paying $46.67 per year of useful life compared to $50 per year. Additionally, we are careful not to get sucked in to well-known brand names and stick with highly reviewed, well made products that don’t break the bank. Many brand-name products have identical generic twins that cost much less (think medicine), so we look for these generic types of items for the best value.

When we are shopping around for a particular item, we try to limit the amount of places to shop around so as to not become overwhelmed. We shopped around for new car insurance just the other day, and while we know of many different companies, we limited ourselves to looking at four companies. In our experience, the amount of work it takes to search around for an extended period usually does not justify the small amount of savings you will end up getting and will drain your energy more than is necessary. If possible, we try to use an aggregation website like Kayak to bring all the options right in front of us to help lessen our decision fatigue.

Always Be Mindful

Like we’ve mentioned before, we believe that spending in ways that bring joy and value will inevitably result in a full and meaningful life, and that financial success will result as a byproduct. When we say we strive to help you feel empowered and in control of your finances, it starts with having a plan and a system in place to think about what you want, what you have to offer for what you want, and whether that trade off will result in net positive joy and value. We hope that the items mentioned above can help you craft your plan, system and mindset around your spending, and that all your spending will contribute to a meaningful life.

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