Blending Life, Wealth, Work & What's Next
May 15, 2018

Mindful Spending

By Jared Jones, CFP®

Mindful Spending

You’ve probably thought at one time “I really should have a budget.”  Or maybe you have one, and you’ve stuck to it for a month or two and fallen off the wagon.  The truth about budgeting is that budgets are hard to create and even harder to maintain. 

The good news is, you don’t need a rigid budget that lists every single spending category to be successful in achieving your financial goals.  In psychologist and Nobel Prize winner Daniel Kahneman’s seminal work, “Thinking Fast and Slow”, he makes the case that awareness can lead to better decision making.  If we are mindful of our decision-making process, we don’t necessarily need a detailed budget that boxes us in. 

With spending, we are bombarded with instances where we need to think fast and slow.  Fast-thinking allows humans to take rapid action without the need for in-depth thinking.  Think about a time when you saw a great deal and put little thought into pulling the trigger on making a large purchase.  This can either be great or lead to buyer’s remorse.  Conversely, slow-thinking is thoughtful, deliberate, and analytical.  Slow-thinking is useful on more significant purchases, but can also induce analysis paralysis and leave you feeling stuck. 

So, how can we bring awareness to our spending habits that lead to better decision making? 

The Eisenhower Method

The “Eisenhower Method” stems from a quote attributed to Dwight D. Eisenhower:

“I have two kinds of problems, the urgent and the important.  The urgent are not important, and the important are never urgent.”

 This led to the creation of the Eisenhower Box. The typical use of the Eisenhower Method is in time management, but I believe it can tie nicely into spending mindfully. 

Urgent/Important:  This box represents mostly your fixed costs. Think about your housing, food, utilities, healthcare, phone, insurance, etc.  These are a must in your spending life and require little thought because they are necessary for you to feel safe.  You probably wouldn’t even consider these if you were to list your most recent purchases.    

Not Urgent/Important:  Usually, this is where most of your spending anxiety is located. It encompasses all the eventual large purchases and big decisions you know you will need to make in the future.  Your first home, a new car, leaving your job, and starting a family are all examples.  This is when it is critical to think deliberately and consider seeking outside objective advice.  Having a financial advisor pays dividends when it comes to making decisions that fall in this box.   An advisor can give you objective advice and make you aware of the biases you’re bringing to your decision-making process. 

Urgent/Not Important:  This box is where your guilty spending habits live.  It’s intended to represent spending on your emotional well-being.  Think of those $5 Starbucks lattes you don’t really need, but really needHowever, this box is more important than you may think.  It’s critical to keep these wants in your life because it will maintain your mental spending energy reserves for the financial decisions that can really throw you off track.

Not Urgent/Not Important:  This quadrant represents your mindless spending.  You’ve used up all your decision-making energy avoiding buying lattes, and now you go on Amazon looking for one thing and end up spending $100.  This type of spending is all the things you don’t remember buying and you don’t need.  If there’s one category to focus on when you want to cut your spending, it’s this one.

Monitoring Trends

While I don’t think it’s necessary to have a rigid budget per se, I do think it’s critical to occasionally check in on your spending to see if you notice any trends – especially any patterns where you are spending a lot of your money that fall in to the Not Urgent/Not Important category. 

As terrifying as this sounds, it doesn’t have to be.  You don’t need to be perfect and just being aware of your spending habits will eventually lead to better decision making.  Start by asking yourself why you are buying something and, if it aligns with your values, then you know it’s worth it. 



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