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Being more mindful about how you spend your money takes a bit of practice, but is certainly possible with a combination of the right habits and a positive money mindset.
In this post, we’ve outlined a simple technique with 3 simple steps to help you decide whether to go through with that purchase - in return, helping you to become a more conscious spender.
1) What’s the value of my purchase?
Step 1 involves asking yourself: “what’s the value of my purchase?”.
Before you decide to spend your hard earned cash on a new item - whether it be the new iPhone, a pair of shoes you’ve had your eye on for a long time, or even an iced coffee from your local cafe - stop and take a minute to think about the true value of this purchase.
By value, we don’t just mean what the price of the item is. Instead, the value in this instance refers to what you may miss out on buying or experiencing if you spent that money on something else.
2) How many hours is it worth?
To work out the true value of the purchase, the next step involves simply calculating how many hours it would take to make that purchase. Time is money, after all!
For example, let’s say you’re on an hourly wage of £10 per hour and you’re thinking about buying a £50 pair of shoes. You would essentially be paying with your time - £10 x 5 hours=£50, so the value of this item is 5 hours of your life.
This helps to put things into perspective if you find yourself spending a whole day’s worth of wages on one purchase!
3) What would be a better purchase?
Finally, calculate what that purchase could be better spent towards.
The value of £50 per month could differ for everyone, but let’s say that’s either a pair of shoes, 1 night of dinner and drinks, or over 2 years off of your mortgage term.
Similarly, the value of £100 per month could either equate to 1 new designer handbag, a family dinner at a restaurant, or 4 years, 6 months off your mortgage term and a saving of £7,369 in interest*.
Thinking about these options and what £50 or £100 per month could get you, what would you choose? What would be the best way to spend your money?
This isn’t to say that there is a right and wrong way of spending your money - you earned it, after all!
However, using this method next time you’re about to make a purchase - big or small - could go a long way towards helping you to be more conscious and informed about the financial choices you make day-to-day.
*Based on a 25-year repayment mortgage of £137,934 at 2.11%
Post inspired by @projectfrugal
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