Is it possible to spend your way to happiness?

Ok, so the headline might be a bit misleading. We are not about to advocate for the cheap and fast dopamine hit you get when you buy something. Being stuck on the purchasing, shopping as recreation treadmill, can be a path to financial difficulties, high debt, and actual falling wealth.

At the same time we are not about to proselytise for a monastic life, shunning all material possessions.

It’s about balance, control and conscious actions.

If you have studied the economy and financial markets, you will know that whatever time you pick, there is always volatility and uncertainty, to varying degrees. At the moment we have higher interest rates, uncertainties from geo-politics and conflict, and the ever-present threat of recession lurking in the shadows. At the same time, we are experiencing resilient economies, a fast return to long-term normal ranges of inflation, and for the last 9 months, rebounding and outperforming stock markets.   

News cycles tend to have a strong recency bias, and an amnesia for what happened in the past, which is why it can often seem like the financial world is tougher today than it was. It probably isn’t, it is just that the focus is on the here and now.

If you are feeling the pressure of the higher cost of living, one powerful way you can take control is to take closer stock of your financial life, and track your expenses.

It is known is that taking control of your finances can reduce stress and improve your wellbeing. One positive way that you can tackle financial worries is tracking your expenditure.

How can tracking your expenses and budgeting help you? 

Budgeting can help you to restore a sense of control

While many people dislike the idea of budgeting or tracking their spending, or find it boring, it can help you to take positive steps towards your goals, reduce stress, and restore a sense of control.

By taking a proactive approach to budgeting, it encourages you to make conscious decisions as you begin to identify what is uniquely important to you. It’s the same approach we take to financial planning –understanding what is truly important to you and focusing on your goals, makes it more likely that you’ll achieve them.  

Tracking your spending can also help you to see your progress and ease anxiety

Knowing where your money is going can boost your happiness. It can also uncover some of the less visible small expense that accrue over time. You can pause and ask yourself if these discretionary purchases are more or less important than your goals. A small change in patterns of behaviour can have a large impact over time.

According to a study in the Journal of Consumer Psychology, you will tend to feel happier when you spend your discretionary money on:

Social experiences, such as holidays or get-togethers with friends or family

Buying time, such as hiring a cleaner, gardener, or someone to do your ironing

Other people, in the form of gifts or charity.

When you track your spending, you’ll start to think about the type of expenditure that brings you pleasure. You’ll begin to notice discrepancies between what you spend money on and what you truly value. This enables you to adjust your spending so you can allocate more money to those things that bring you joy.

5 tips for budgeting and tracking your expenses

So, if tracking your expenses can boost your wellbeing, what is the best way to go about creating a budget?

1.             Review your outgoings and see how you spend your money. Identify your major spending areas (such as housing, transportation, and food) and estimate your average monthly spending in each category.

2.             Set a budget. After you’ve identified how you tend to spend your money, it should be clearer when it comes to creating a realistic monthly budget for future spending and saving.

3.             Break down your budget. It can help to split your money into necessities (what you have to pay for), discretionary spending (that you could cut back if you needed to) and long-term goals (such as paying off debt and saving for the future).

4.             Start tracking. Record your spending in each category and how it matches your budget goals. This helps you to improve your habits and increase your sense of confidence and control.

5.             Reward yourself. Reward yourself for taking steps to become financially secure – and don’t worry if it’s a slow process. Small is better than nothing!

These steps don’t have to be onerous. Most banks will have an app that will do a lot of the classifications of expenses for you. This is a great place to start. Then, as it focuses you on what is most important, reach out to us and we can incorporate these goals into your financial plan that can bring all aspects for your financial life together.

Being on top of your costs through budgeting can bring certainty and reduce money stress. Speaking with us can build upon that and put you on track to make the most of your current position and set you up to achieve what is most important for you in your life. If you would like more information, you can contact us at info@blackswancapital.eu. If you know someone that could benefit from this information please share the article with them, or direct them to have an initial discussion with us.