Everyone spends. If you are part of the modern economy, you will need to spend. The difference between the rich and the poor is the awareness of it. Of course, knowing money management strategies like T.Harv Eker’s Jar System and how to invest do make a difference between the rich and the poor but that is not what we are going to discuss today. We are going to solely focus on how to spend consciously.
To spend consciously is to spend in ways that could increase value. Value could be anything. Your economical value, your productivity value, your knowledge value, your value to create and etc. All of this sounds obvious and everyone ought to do this. Alas, most if not all of our buying decisions are not rational. Most of the time, we buy unconsciously. How many times did you buy something because you wanted it rather than you needed it? How many times did you buy something because a friend has it?
Being humans, we will still spend emotionally but the following questions are devised to help you make purchases more consciously.
1. Will this help me create more value?
Most of the time, this involves in buying new tools. Tools in this sense, might be a new computer, a new camera lens, a new oven and etc. The key here is more of increasing your capability and/or productivity rather than just simply upgrading it.
Let’s use an example to get the point across. In the case of a new computer, if your reason of buying it is because it enables you to create something new like graphics rendering that was previously impossible with your old machine. Or if your reason is to shorten the time that your graphics need to render so that you can get more done. These are all good reasons to buy and it helps you create more value.
A way to misuse this question is to make a justification that the computer can enable you to create new things but what you really do is just watch movies or play games on it most of the time. I’m not saying that you shouldn’t use your computer for entertainment but it just shouldn’t be the big part of it.
2. Will this help me increase my value?
I typically use this with books and seminars. You might be wondering why is this question needed? Aren’t all the above are supposed to increase your value? Well, that might not be necessary.
A great fiction book might not help you increase your value unless you are a producer looking for the next great story to produce. There are seminars that are life changing and there are those that just tell you things that you’ve already know so choose wisely. Read the comments and gather feedback from people who went to the seminar before.
3. Is this a reward for a challenge that I’ve completed?
From time to time, we will need to satisfy our buying desires. If not, where is the fun in life? The key is to do this in a reasonable way. If you do have some desire for things that you can’t justify by both of the questions above, then you put it as a reward for a challenge that you set for yourself. This will only be meaningful if the challenge is at the same level at the reward.
For example, I currently have a fully functional car that takes me from point A to point B with no problems but at the same time, I would like to get myself an electric sports car. It definitely doesn’t justify any of the two questions above. So I set it as a reward for myself if I can take my company public and if my company can achieve a profit of 500 million this year.
It would be unreasonable for me to put that as a reward for a challenge as meager as to be able to wake up on time tomorrow.
4. Am I really going to use this?
Remember that guitar in your attic or that dusty Japanese Self-Learning book on top of your bookshelf? We are all guilty of this at one point of our lives. That sudden urge of doing something and then just putting it aside when other things that we deemed more important comes along.
No matter how great the potential incremental value of a purchase is, without actually using it, it equates to nothing. If you are a young reader of mine, I wouldn’t blame you because this is part of the learning process. If you are already working, I would suggest you to look into your past purchasing behavior and your current determination. If you think that you are determined enough, plan some social re-enforcement too. Declare your plan on your social network(s) and ask your friends to help encourage you along the way. With this, you can be sure that your purchase won’t be wasted.
5. Am I honest with myself?
This question is more of a sanity check rather than a question to help you spend consciously. The reason is the same as I’ve mention above, people make emotional decisions and then justify them later. This is to help prevent you from doing that. Like the examples above, all of these questions can be abused to make unconscious purchases. If you want to spend your way to greater value, please make sure that you are 100% honest with yourself.
I hope the above questions help you to make more conscious purchases thus helping you gain greater value. Of course, the questions above don’t only apply to money. It could be used in other areas too. Such as, time. I look forward to hear your inspiring stories about how you use these questions and how did they change your life.