Does your debt give you anxiety? Do you try not to think about it? Does the thought of what you might need to do to eliminate the debt cause you to start breaking out in a cold sweat? If yes, you’re not alone. And a lot of financial planners would start out by looking at your spending habits and telling you that you could cut out your daily latte, your dance class, your monthly splurge at the local bookstore…
But not me.
No, when trying to eliminate debt, the first thing I would ask you is which of those indulgences you can’t live without and which ones you wouldn’t miss. This is what I call conscious spending. It’s not about perfection or frugality, it’s about what works best for you as the individual. Because here’s the cold hard truth: unless you spend less than you earn, you’ll never feel financially secure.
But…it doesn’t have to be punitive.Because here’s the cold hard truth: unless you spend less than you earn, you’ll never feel financially secure. Click To Tweet
When you’re looking at your spending and assessing your expenses, clarity and improvement is an ongoing challenge. It’s a lot like eating healthy. If you’ve ever had issues with overeating and adopted a “mindful” approach, you know that the more conscious you are of what you’re eating, then the more conscious you are of your behavior relative to what you ultimately want—usually, to fit into your jeans, avoid gaining weight, etc. With spending, it’s the same principle: the more clarity you have around how you spend money, the better you’ll be able to align your spending habits with your actual financial goals (radical, right?). It’s an ongoing challenge to be as conscious as you possibly can.
Everyone I work with always wants me to identify how much they should spend in different areas, but here’s the issue with that: your spending is highly subjective. Two people could earn the exact same amount of money, and because of their situation, they would have drastically different ways of spending it. Or, maybe two people who make the exact same amount of money and are in the exact same demographic will still spend in dramatically different ways, because of their value system and the principles and priorities in their life.
Consequently, I might tell one person to cut back on eating out and they agree that there’s an opportunity there. But then I’ll make that same suggestion to another person and they’re going to look at me like I’m going crazy – because with their priorities, that’s completely inconceivable to them. Everybody’s got their own personal values around their spending.
The ultimate goal — and the first essential step for debt reduction and a solid financial foundation — is for your expenses to always be less than your income. But I don’t think that has to be about deprivation and sacrifice. Not even when you’re trying to eliminate debt. What I really want for people is for them to be able to spend strategically and get the maximum satisfaction out of every dollar. And for you to get the maximum use out of every dollar that goes out of your household.
So, if you’re worried about talking with a financial planner about a strategy to eliminate debt because you think I’m going to make you give up happy hour with your girlfriends or your weekly comic book, don’t be. I believe that with a conscious spending plan, you can work towards a plan to eliminate debt and still have a life.
Want to find out how? My free guide Conscious Spending in 30 Minutes or Less is a great place to start. You can download it from my library of resources here.