Being Mindful With Spending
Mindful spending is when we only buy something that will create a net benefit to our well being, in proportion to its relative cost. The idea here is to spend money with purpose! 😀 This will reduce waste, maximize economic utility, and give us the most bang for our buck, so-to-speak. 🙂
In practice, all we need to remember are 3 simple questions when contemplating a new purchase.
- Why do I want this?
- What are the positive and negative effects this product or service will have on me, whether they be physical, practical, emotional, or spiritual?
- Assuming the answer to #2 has a net positive benefit, how much am I willing to pay for this?
That’s pretty much it. We can use this simple application every time we want to buy food, furniture, cars, investments, a swedish massage, real estate, and even an education. This literally works for anything that has monetary value.
Let’s take a look at how we might answer those 3 questions in real life cases below: Since mindful spending is based on individual preferences I will only be using myself in the following examples as I can’t speak for anyone else.
- Should I buy a Nikon D5 camera?
1) I want to take pretty photos just for fun.
2) Helps me learn to become a better photographer. Fun to play with a new camera.
3) $100 because I’ll probably take the camera out with me a few times, get bored with it, and never use it again.
So in this case, I would not buy the camera since it costs thousands of dollars.
- Should I go back to school?
1) To increase my earning potential.
2) Spend 2 to 4 years in full-time education. Estimated income out of school is 5% to 10% higher than now. Loss of income during time in school.
3) (-$70,000) because after accounting for both benefits and opportunity costs of going back to school, I would lose $70,000 in the long run.
So in this case, it’s not worth it at all. Even if I received full scholarship to attend art school for free I still wouldn’t do it.
- Should I subscribe to Netflix?
1) I enjoy watching its original programming.
2) Provides entertainment value. On demand and no commercials. Uses up a lot of my limited internet bandwidth.
3) $40/month, because for the enjoyment I get out of the service I would gladly pay $2 per hour of view time, and I watch at least 20 hours of Netflix a month.
So in this case, I would and actually do have a Netflix subscription already since it’s only $10/month, which is cheaper than what I’m willing to pay for.