Good financial management is one of the most important skills that we will have to develop in our lives, and there are all sorts of different techniques and tools available that can be utilised in order to save more effectively, reduce financial waste, and more.
Often, however, the best place to start when you’re looking to make a real and lasting impact when it comes to your financial management is to work on adjusting your mindset and adopting certain mindset principles that will then naturally tend to influence your habits accordingly.
Financial waste is frequently one of the primary factors that can prevent us from reaching our savings goals. So, here are a few mindset principles for reducing financial waste in your life.
Be aware of the difference between the “craving” response and the “satisfaction” response
These days, there is more psychological pressure on the average person than ever before in history, to spend compulsively and to perpetuate a more or less unconscious approach towards consumer purchases.
While everyone will obviously need to go shopping from time to time, it’s important to realise that the “craving” response that you feel when you see a compelling advert involves completely different processes in the brain to the “satisfaction” response that we typically imagine is going to be activated once we actually get the new product in question.
In the book, “The Molecule of More,” the authors investigate how the neurotransmitter dopamine is fundamentally involved in mediating craving, the pursuit of novelty, and the general restless attitude towards life that contributes to things like compulsive spending.
At the same time, they also outline quite clearly that the actual appreciation of things – happiness and fulfilment and satisfaction – is mediated by entirely different neurochemicals, and is, in various ways, significantly more complex.
So, just remind yourself whenever you feel the compulsive urge to buy something, that the object of the craving might not lead to any greater happiness, fulfilment, or satisfaction in your life.
Get used to implementing a deliberate pause before all substantial purchases
One of the major sources of the financial drain in just about everyone’s life is expenses that are incurred in the heat of the moment, without adequate time being allowed for contemplation, reflection, and a more cool-headed and balanced assessment of the situation.
Of course, it’s one thing if you are out and about and decide to buy yourself a cold drink to enjoy. But when you find yourself making more substantial purchases in the heat of the moment, instead, that’s very likely to end up being negative for your ability to save and manage your finances effectively.
For one thing, it’s natural for everyone to become excited and swept up in a state of enthusiasm from time to time when they see something that they really want. But that state of mind doesn’t exactly lend itself to a balanced and sober assessment of the pros and cons of a given purchase.
For another thing, whenever you buy something impulsively you are naturally not putting yourself in a situation where you will be shopping around, comparing prices, and weighing up alternatives.
The more you can get into the habit of taking a deep breath and pausing for a while before each substantial purchase – ideally at least for a day or two – the better the odds that you will be able to make more reasonable decisions.
Investigate the factors that lead to elevated costs, and look for workarounds
There are all sorts of different factors that can cause you to spend more money in one area of your life than you would want to – and there are often a variety of adjustments you can make or workarounds you could take advantage of, that would allow you to make significant savings without much additional effort.
The more you can get into the habit of identifying reasons for elevated costs, the better able you will then be to find effective workarounds, and habitually end up saving a bit more money.
It might be, for example, that a branded version of an item is a lot more expensive than a generic version, but that the actual qualitative difference between the two is essentially non-existent.
For other products, your choice of retailer might make all the difference. Printer ink isn’t cheap, for example, but you can certainly make substantial savings when purchasing it from particular outlets, and when using particular subscription schemes.
Set yourself goals that will correlate to a sense of meaningful fulfilment, and avoid using materialism as a substitute
Throughout human history, there have been aphorisms, folk tales, myths, and stories that have tried to convey the message that fulfilment in life comes from things like social connections, and pursuing a life of higher meaning and purpose – as opposed to the simple acquisition of things like material goods.
In the advertisement-laden consumer landscape we all find ourselves operating in today, it is often implied – if not outright stated – that a materialistic approach towards life is an effective source or substitute for that kind of higher meaning.
When all is said and done, however, psychological research has consistently found this not to be the case. While a certain amount of material comfort is obviously necessary – and while it can obviously be pleasurable and helpful to pick up a new gadget from time to time.
You should remember that if you feel a sense of general restlessness or lack of fulfilment in some dimension of your life, the solution is likely to be found somewhere other than in a consumer transaction.
In other words, avoid the temptation to try and use materialism as a substitute for deeper fulfilment and sense of meaning.
Become genuinely curious about your expenses
If you don’t track your expenses meticulously, there’s a good chance that a lot of money regularly trickles out of your wallet and your bank account in a pretty haphazard way, without you necessarily knowing exactly what’s going on.
A good mindset to nurture in response to this is a sense of genuine curiosity about your expenses. Begin using a financial tracking tool to keep an eye on what you are spending your money on. Tally up your expenses for at least a couple of weeks, divided by category.
Often, just being more interested in how you’re spending your money, and being more aware of where your money is going, can make a major difference.