Money Mindfulness: The Importance of Setting Financial Goals

    

Money Mindfulness - The Importance of Setting Financial Goals First State Community Bank Blog

Money concerns are top of mind for all of us. We worry about how to pay the bills, whether we are saving enough, and how to reach our financial goals. However, worrying about money is not the same as money mindfulness. In fact, it’s the exact opposite. If you can train yourself to be mindful of your spending and your approach to money, many of those financial worries will disappear.

Many people have free-floating anxiety about anything to do with money. According to a study by Northwestern Mutual, 85 percent of Americans have some level of anxiety when it comes to money. Money worries can have a negative impact on your health, your social life, your career, and your overall well-being. Even those who maintain close control over their finances experience worries; watching your money isn’t the same as being mindful.

If you can change your attitude about money and about spending, you will be better equipped to make intelligent decisions about your money without becoming obsessive. Money mindfulness will free you by allowing you to control your cash so it doesn’t control you.

What Is Money Mindfulness?

Before we consider how to cultivate money mindfulness, let’s define what we mean by being mindful. Mindfulness is a matter of being aware without feeling overwhelmed. An article in Psychology Today lists three specific ways that scientists define mindfulness:

  1. Mindfulness is not taking things for granted.
  2. Mindfulness is living in the present and being in the moment.
  3. Mindfulness is making a conscious effort to maintain an attitude of openness, acceptance, and curiosity.

When it comes to money mindfulness, this means being aware of money and your choices about money. Unfortunately, many Americans fear money and are afraid to talk about it. Money anxiety is linked to concerns about the future and fear of the unknown; for example, some people fear they will not be prepared for an unexpected emergency or will not have enough money to retire.

You can’t prepare for the unknowable or control the future, but you can take charge today by practicing money mindfulness, starting with financial planning.

Financial Planning Promotes Peace of Mind

Most money anxiety stems from one nagging question: “Do I have enough?” But “enough” is a vague, ill-defined term. Some would say you can never have enough, but you should be able to establish what “enough” means for you as it relates to your financial goals. You can’t predict the future, but you can plan for it, and having a plan will help assuage money fears.

Start by establishing short-term and long-term goals for the major milestones ahead. How much will you need to have enough for college, a new car, a new home? Do you have enough to buy the clothes and household goods you want? Have you saved enough for your next vacation? Have you calculated how much you need to save in order to retire?

Once you have established your savings goals, you can create a budget to achieve those goals. Add up all your sources of monthly income and monthly expenses and determine how much money you can allocate for savings to meet your long-term and short-term goals.

Understanding your day-to-day costs and how they map to your financial goals gives you targets for financial planning. You may not be able to control the future, but you can keep track of the present to see if you are meeting the milestones that will help you reach your financial objectives.

Practice Everyday Money Mindfulness

With a budget in place, you can estimate what you need to save for your goals and determine what you have left over for discretionary spending. This is where everyday money mindfulness comes into play.

Part of living in the moment is paying attention to where you are and what you are doing, including how you are spending your money. Do you think about it when you buy a latte, go out for lunch, or decide to take a cab or Uber instead of the bus? Do you ever stop to ask yourself, is this expense or purchase really necessary? CNBC reports that the average consumer spends $450 per month or $5,400 per year on impulse purchases. If you are money mindful, you could turn those dollars wasted on impulse buying into savings for your goals.

Tracking your daily spending helps you spot unnecessary purchases and makes you more aware of where your money is going. To simplify your expense tracking, consider using a tool such as MoneyTrack in the FSCB Mobile Banking app to help you keep track of daily spending. Determine where your money is going and see if you can use money mindfulness to change your spending habits so you have more to allocate to savings.

Turning Mindfulness into Savings

Being mindful of your spending is the first step, but you also have to convert the money you don’t spend into savings toward your goals.

Start with a savings account. You can set up automatic funds transfers from checking to savings to transfer the cash you save from mindful spending. Also consider using tools such as FSCB’s Pocket Change, which rounds up debit card transactions and deposits the difference in your savings account.

Use credit cards that offer cash bonuses or benefits, such as points toward travel, that will help you achieve your goals. Many cards also offer bonus points for specific types of spending, such as dining out or buying consumer electronics. Be aware of your credit card terms and benefits and make the most of them.

As your savings grow, be sure to make the most of your money. For example, put your savings into a certificate of deposit (CD) to earn higher interest for planned expenses such as a vacation, or put the money into an individual retirement account (IRA) to help meet your retirement goals.

Also be sure to periodically revisit and adjust your financial goals. Adjusting expectations is an important part of mindfulness.

If you learn how to practice money mindfulness, you will reduce your daily money-related stress and be able to take charge of your finances. You also can get help to achieve your financial goals. The team at FSCB will be happy to help you develop a savings program that gives you peace of mind.

Visit FSCB's Financial Resource Center

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