What is a conscious spending plan?

Published on Jun 10, 2023

What is a conscious spending plan?

Budgets get a bad rap because they’re often focused on cutting out spending on fun, and people rarely stick to them over the long term. Conscious spending is a different way of planning for your monthly income that prioritizes mindfulness over simply spending without thinking.

People are often more successful in meeting their financial goals when they make a deliberate plan for their money that acknowledges their individual preferences and values, while working to carefully consider every spending choice. That’s why a conscious spending plan can be a wise approach to managing your money.

What is conscious spending?

Conscious spending is a method of managing finances that is focused on creating a plan for mindfully spending your money in a way that corresponds to your individual goals and values. With conscious spending, you make a deliberate choice to spend more on the items or pursuits that mean more to you, while giving up the things that don’t mean as much to you.

For example, with conscious spending, if shoes are your favorite things, you will make it a priority to free up funds for new shoes. You’ll do that by cutting back on dining out, Netflix, sporting events or other things that aren’t as important to you.

How can conscious spending help you meet financial goals?

When you develop (and stick to) a conscious spending plan, you can meet your financial goals while still enjoying the things that mean the most to you. That’s because conscious spending allows you to spend on the things you care about, rather than spending whatever you happen to spend out of habit or mindless spending.

Many of us have a habit of spending without thinking, stopping for a coffee on the way to work, grabbing a soda at the gas station when we stop to fill up the car, signing up for paid apps or subscriptions that continue to charge us long after we’ve stopped using them, and ordering takeout or delivery because we forget to plan ahead for cooking dinner. All those habits add up, causing us to spend much more money than if we spent mindfully.

With conscious spending, the goal is to stop spending mindlessly and make conscious choices about every dollar you spend. By only splurging on the specific priorities you value, you save money on everything else.

This plan helps you meet financial goals by freeing up more money to allocate toward those goals. Because you think critically about each purchase and spending only on things that matter to you, you’re able to stretch your money further.

How to develop your own conscious spending plan

Building your own plan for conscious spending requires you to figure out what really brings joy to your life, and develop the discipline to resist spending money on the things that don’t bring you joy. The best way to build a plan is to follow these four simple steps:

  1. Set financial goals. Start by writing down your personal financial goals. Do you want to build an emergency fund? Do you want to buy a home or a car? Save enough to pay for your child’s college tuition? Build a retirement fund? Whatever your money goals are, write them down and figure out how much you’ll need to save on a monthly basis to reach each goal. (Keep in mind that you’ll probably have different time frames for reaching each goal.)
  2. Take time to think through the types of spending that make you most happy. Outside of paying your bills, managing debt and saving for your financial goals, what type of spending really brings you joy? Most people can’t afford to spend money on every potential whim and still stay on track to meet their financial goals, but instead of limiting all the fun spending, this is where you consciously determine what spending means the most to you. Maybe it’s investing in your kids’ sporting activities, traveling, or buying books. Narrow your “happy spending” to a few categories.
  3. Categorize your expenses. All your spending can be categorized into three buckets: fixed expenses (such as housing, utilities and food), the wants that make you most happy (determined in step 2), and future plans (saving toward your financial goals). If you normally spend money on anything that doesn’t fall into these three categories, you must cut out or drastically minimize that spending.
  4. Automate the process. Once you’ve made conscious decisions about how to spend your money for maximum benefit, you can make it easy to stick to your plan through automation. Direct funds to automatically go into the appropriate accounts for saving, monthly expenses, and “happy spending,” and you’ll be on the right track.

Making deliberate choices about how you plan to spend your money can help you avoid mindless spending and meet your goals while still getting to enjoy the fruits of your labor.

For informational/educational purposes only. The information in this content is not advice on legal, tax, investment, accounting, regulatory, technology or other matters. You should always consult your own financial, legal, tax, accounting or similar advisors before making any financial or investment decisions, or entering into any agreement for bank products or services.

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