Do you sometimes feel that your financial life is on a roller coaster? Have you ever purchased some big-ticket item—like a car or computer or expensive clothes—that you later wish you hadn’t? Maybe it seemed like a good idea at the moment, but then you got home and checked your bank account and realized you were already too deep in debt?
I know I have—multiple times over the years. I once negotiated for a brand new Corvette but then got home and had to go back and cancel the purchase. I ended up with a Honda instspendLooking back, it was a good decision since I totaled the Honda a month later anyway in a car accident! Another time, I quit a good job that I regretted later that evening and had to suck it up and go back to my boss and ask for the job back. He gave it to me.
These are all learning opportunities and where you learn what you’re made of (from a decision-making perspective).
It may seem like you fall into the same cycle or routine every time it happens! First, you deny it, later regret it, then you worry about it, try to get out of it, and maybe at some point, you finally accept your fate. Sometimes you never move past it, though.
Through my decision-making research and practice with thousands of people, I’ve learned that being more mindful of the choices we make, especially as they surround money, is extremely important. I use the term “mindful ” to represent when we are fully conscious and awake when making a choice. And, life is all about decisions—we make hundreds of them a day, most of them unconsciously.
I’ve used mindful decisions to build my wealth over the last two decades. Here is what I did, and maybe these can help you too.
First, spend a few hours reviewing all of your prior months (at least 1 or 2) spending and saving patterns. I know you might hate the word “budget,” but you need to write down all expenses (things you charged, paid for by cash or check, or other ways). You want to find out answers to these simple questions:
- How much did I earn net per month?
- How much did I spend, and in what significant categories? At least list the types of Rent/Mortage, Car, Food, Subscriptions, Gas, etc.
- How much of my net pay went into my a) Savings, b) Investments and c) Retirement accounts?
- Record the $ amount and the % of your net pay for each of these
- This will result in a simple formula:__ % Spent, ___% Saved, ___% Invested/Retirement, ___% Giving
Now, this results in what I call your Money Management Allocation formula. Your challenge now is to find a mix of this that works for where you are today. I recommend 50% expenses, 15% savings, 25% investments, and 10% giving to a charitable organization or family member. If you have $5 million in the bank, spend as much as you want on purchases and have no regrets! But if you are like most of us, you need to keep that percentage of your net pay for expenses limited to 50-60%. Any more than that, and you aren’t doing what you need to be doing to balance your financial future. But, this is all based on many unique factors, which we don’t need to go into here!
Remember, all purchases (things you buy) tend to be for nearly immediate gratification. Most of the money you invest and save is for longer-term (delayed) gratification. As children, we, of course, needed everything now. But as we become more mindful about choices and our future, we have to balance this formula out carefully. I recommend you think about important financial matters for the long-term, not just on the short-term benefit.
So, make sure you understand your simple money formula. Then, make a plan to reduce the spending based on where you are currently.
Now back to my original point. You have nothing to worry about if you are doing well in the savings/investment/retirement side of the equation. If you have a certain amount planned for expenses, and you are under that, don’t fret too much about that purchase.
But, if you spend too much and purchase something you now regret, I have four simple tips to get over this dissonance.
- First, try to take it back. You’d be surprised how often people take back items even if the receipt says they won’t. Try this first! Be brave and go in and ask for a full refund! Ask for the manager; ask for options, such as a credit or a discount or something else. You’ll be surprised how often this works. Tell them you can’t afford this, and you shouldn’t have done it. People find it difficult to say ‘no’ when facing another person (versus email or phone calls).
- Decide between immediately re-sell the item and just keeping it. Getting back a portion of what you spent is better than nothing, but as a person who DESPISES losing money and paying fees, I suggest you look around for the best options here. Take a minute and list out all of your options. Ask for input – maybe there are ideas others have that you haven’t yet considered? Perhaps listing on a different site or finding somebody you work with that might be interested. Other times, it is just best to keep the item and make the most of it.
- Forget about it! We spend way too much time focusing on the past and not enough preparing for the future. So, once you decide that you are keeping something, you have to work through the ‘acceptance’ phase. Repeat a few daily mantras, or use a cognitive practice where you switch to a different message each time that worry or anxiety enters your mind. Your brain is nothing more than a computer that constantly repeats historical patterns and messages. Our task is to re-program it to say better and more positive messages. If you hear yourself saying, “I can’t believe I spent that much money on this,” then immediately re-tune your brain to “I am focused on the future, and making better, wiser choices every day!”. Or, “Every day, I am getting stronger and smarter about my money and my financial choices.”
- Then, the most essential of all is this: take a moment to step back and create a financial roadmap. A roadmap implies that you have pre-thought out (in advance) where your priorities lie—what you want to do, what is most vital for you in the future, and what your short and long-term goals are. Then, you work towards funding those—not daily expenses. This way, every time you come into a store or showroom, you keep those priorities in your head. Write them down even. Put them on your mirror, put them in your wallet or your car, anywhere you can see them daily. You will focus on those things which you prioritize!
These work for me. I hope that these tips help you too.