Pinpoint your spending ‘blind spots’
Looking at the statistics of consumption and levels of consumer debt in the Western world there is not much doubt in my mind that most of us, most of the time spend too much money, on too many consumer items. This is how we have become over-spending, over-consumers – we eat too much, drink too much and have too much stuff. Even when this is valuable stuff! I certainly did fit the bill until very recently. Having realised this I started thinking about ways to limit consumption – my consumption, in this case. One way to do this, as I discovered, is by mastering my wants and working out what are the things I really, really value. By accident, whist doing the exercise, I also noticed that there were, what I have come to call, spending ‘blind spots’.
Spending ‘blind-spots’ are areas of spending where a product, a service and an experience are inter-twined. In such cases it is very easy to believe that you value the product when it is the experience; or the other way around. But explaining this one will be easier using some examples.
I used to spend obscene amounts of money on buying coffee; when in the office I used to buy on average five espressos a day. Apart from so much coffee not doing my stomach any good, it was doing my finances real damage. But why was I doing it? Was it because I like coffee bars (which I do but they have to be proper, coffee culture places) or the coffee? Not much could be done before I figured this one out. When I thought about it, I never stayed in the coffee bar; I went, bought a coffee and went back to my office. It was the coffee! The next question is – why buy it from the coffee bar? An espresso there costs £1.25 (and is not very good quality) if I bought an espresso coffee maker (£45) and really high quality coffee it will cost me less than 10p including the depreciation of the machine. This is what I did. But if I discovered that I like the coffee bar the solution would have looked somewhat different. Oh and btw I don’t drink so much coffee now either – but this is entirely health rather than finance related.
Another example of spending ‘blind spot’ is the lottery. I never play the lottery – I consider it a waste of money and time. It is still true, however, that people can get different things out of it – some people do win the jackpot but even more people hope to win something (irrespective of how misguided this hope may be). So if you play to win and get rich – the smart move is probably to stop spending on the lottery now and start squirreling small amount regularly. This way you stand a much better chance to improve your financial fortunes. If, on the other hand, you play because you like living with hope – by all means continue. I just hope that you buy your ticket on Sunday – longer hope, better value.
What are your spending ‘blind spots’? How do you cope with them?