21 March 2011

Money: Making Decisions About Spending

Have you ever thought about what motivates you to spend your money? What drives you to choose a certain brand or option over another? Is it something you've always bought? Do you always look for whatever is cheapest or on sale? Have you had a good experience with that particular item? Did a friend or relative recommend it to you? Does your purchase benefit an organization or cause you support?

In order to make decisions about how we spend our money, we need to be conscious of our values. There are no right or wrong answers - just an opportunity to develop a greater awareness around how we spend our money.

Over the next month (or longer), I recommend writing down every cent that comes into or out of your life. You can use a small notebook, a smartphone app, sticky notes or whatever appeals to you to write down every penny you spend and every penny you receive. This exercise will yield lots of useful information for future calculations.

One thing to keep in mind is consistency is very important. At first, you may notice that you alter your spending habits because you don't want to have to write it down. You may want to procrastinate - you tell yourself you'll write everything down at the end of the day. Don't wait! Write everything down as soon as money comes into or out of your life. Don't round numbers up or down - write down the exact amount. The longer you can maintain this exercise - the more accurate the information will be because it provides more longitudinal information.

To clarify, the water company invoices me every other month. I also pre-pay my auto insurance six months in advance (to take advantage of discounts). If I only wrote down my expenditures and income for one month, it will give me a very skewed picture of what my average expenses and revenues are and make it more difficult to create a workable budget or calculate and plan for other financial concerns. Gathering detailed data over multiple months generates more accurate data.

Next week, I will discuss how we can organize this data into useful information such as creating a budget, calculating our real wage and aligning our values with how we use our money. For now, just write down everything you spend or receive/earn without judgment. No shame, no blame - detach from any emotions you are feeling and just write it down as objectively as you can.

No comments:

Post a Comment