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.
The Problem With Budgeting
Budgets can be very motivating when you think you’re makingchanges 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.
Instead, I advocate conscious spending. This is the belief that once you examine your consumer habits and understand where you derive the most enjoyment, you can actually better utilize every dollar.
When I got serious about tracking expenses, I was shocked to discover that I spent over $150 monthly at Starbucks! Instead of just 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:
Gain clarity. You must track your cash out flow—a distinction that often gets lumped in with budgeting itself, but that 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. Of course, there are plenty of other budgeting software options to help you with starting the budgeting process.
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.
Distill the experience. I’ll 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.
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.
If you found this helpful, you might like my free ebook – Getting Started With Conscious Spending. You can download that here.