Join Jane Barratt for an in-depth discussion in this video Understanding why you spend (sometimes too much), part of Personal Finance Fundamentals.
- It's not how much money you earn, but how much you keep. That is the key to your financial success. And the delta between those two numbers is how much you spend. In this video, I'll cover the idea of Conscious Consumption and how being more objective about what you spend can help you long term. According to eMarketer, advertisers around the world spent over half a trillion dollars last year marketing their wares. 1/3 of that, $180 billion, is in the U.S. And of that, 36 companies, all of whom you know well, spent over $1 billion in media.
It's no wonder you want a shiny, new car. I spent 20 years in the advertising and marketing world. The way that you feel about certain companies and brands and products, it's no accident. There are brilliant people all over the world that spend their whole careers figuring out exactly how their shampoo will make you feel energized or their gum will empower your day or their car will make you feel like a rock star. But it's not all advertising's fault. Humans are hard wired to compare themselves to others.
It helped us survive during much tougher times when the weak ones of the tribe had to be left behind. This hard wiring manifests itself now into the syndrome known as keeping up with the Jones'. In the words of Will Rogers, "Too many people spend the money that they earn to buy things they don't want, to impress people they don't like." In this chapter, I cover tips on budgeting and managing your credit cards. They're the practical manifestations of controlling your spend. In this video, I'd like to explore the idea of Conscious Consumption.
My goal with my business is to turn consumers into investors. Step one of that transformation is for people to be more aware of what they're spending their money on. Conventional wisdom says to pause before you make a purchase. Research the options, wait a few days, comparison shop. You can do all those things, but if they worked, the average debt of a household with credit card debt would not be 15,000, as it is now. My view is different. I'm a big believer in the idea of follow the money, in both your career and in having a better understanding of where your money goes.
You work hard for your money, everyone does. Then you give your money to companies for the things that you want and need. Those companies work hard for you business, but their primary responsibility is their shareholders. Those brands that empower and energize and make you feel like a rock star, they're working for the people who've invested in them. Or to put it differently, the outcome of your hard work and the hard work of these companies, is making Mr. Connecticut Hedge Fund Manager richer. Who owns the companies that you spend money with? Who is getting paid? There are much more powerful ways to be conscious of your consumption habits than just pausing or price checking before you buy.
Now do one more thing. Look around at all of the stuff that's made it into your home and into your closet. How much of it do you truly value? How much is functionally important? How much is just stuff you could have done just fine without? Or perhaps it's things that you wish were better quality. Remember this mini audit the next time you're shopping. Every dollar you spend is a vote for the companies that you're buying from. Are they companies that you trust and believe in? Or are you just buying out of habit? Your money is enormously powerful.
Use your votes well.
- Maximizing your earning potential
- Planning for future earnings
- Budgeting and spending
- Understanding your credit score