Seven Ways to Think About Money So You Stop Wasting It

How do you think about money? In many ways, our psychology of money determines what we do with it. Before you can build better spending habits, you may need to change the way you think about money. For all the budgeting tactics and money-saving life hacks there are, they may not help you stop wasting money if you don’t have the proper money mindset.

Whether you’re just starting to independently manage your finances or are looking to escape a money mentality you inherited from your family, here are seven ways to adopt a healthier mindset and a wealthier savings account.

1. THINK OF MONEY AS A MEANS, NOT AN END.

Many of us—myself included—think of earning money as the goal. It’s why we go to work and research the best rates for our savings accounts. We feel good when we make a deposit and can feel guilty when we spend it. Even the cash that goes toward necessary bills like groceries, rent, and utilities can feel like a loss—we’d rather keep it in our pocket.

But the reality is that money isn’t a result in and of itself. It is a means to an end. For the most part, we don’t acquire wealth for the sake of being wealthy (and if so, then wasteful spending probably isn’t much of a worry). We save money to use towards the things we need and want.

The more we think about money as a tool to get us what we want—a second car, a dream house, date night—the less we objectify it as a number in our bank accounts. When we view money as just a number that goes up and down based on our income and expenses, we don’t consider it in terms of what it can get us. By considering and spending our money with greater intention, we naturally spend less of it on regrettable purchases.

2. THINK ABOUT WHAT IT’S FOR.

We are less likely to spend frivolously if we have clear goals for what we want to do with our money. Not all of us are motivated to save 20% of our salary because Elizabeth Warren’s rule of thumb says we should. It can feel like just another abstract number. A new outfit on display in the shop window, on the other hand, is tangible and immediate, which can make it feel like a more appealing and pleasurable use of our income.

3. THINK OF MONEY SEPARATE FROM EMOTION.

Unfortunately, money is often wrapped up in emotion—anxiety, stress, guilt, greed, relief, and happiness, to name a few. What does that have to do with how we spend our money?

If we’re anxious and stressed about how much money we have, and then on top of that feel guilty for what we spend, what are the odds we’re going to mindfully track our spending habits? Conscientiously knowing what we’re spending feels like it will only bring on more stress and anxiety.

But what about relief and happiness, you ask? How are these positive emotional associations bad for us?

Spending money as a coping mechanism to distract or relieve us from other negative emotions is a quick, short-term fix that can easily snowball into a bad habit. As for happiness, money can only buy so much of it; at a certain point, we’re spending more and more to replenish the temporary happiness of a new purchase.

By not making money the currency of our emotions, we are apt to think more clearly and make better financial decisions.

The next question, of course, is, how do we separate our emotions from our money? While this could serve as its own article, here are a few quick tips to manage our emotions and our money:

• Identify the connection between them. By starting to understand how our emotions can trigger our spending, we become more aware of when it’s happening—or happened—and can start to make the connection less automatic.
• Wait. Instead of immediately succumbing to our purchasing impulse, we can set a timer for 10 minutes or come back the next day and see if it’s still something we absolutely must buy.
• Track our purchases. If we enter all our purchases into a spreadsheet, we are likely to be more cognizant about what we’re spending as opposed to just what we’re feeling.
• Use emotions to our advantage. If you can’t beat ‘em, join ‘em. Contrary to the advice above, we can apply our emotions to foster positive spending habits, like the relief and happiness we might feel as we pay off outstanding debt. By celebrating our successes, however small, we can leverage positive emotions to stop wasting money.

4. THINK LONG-TERM.

It isn’t wise to avoid financial planning simply because it’s difficult to project what our future holds 10, 20, 30 years from now. Even though it may feel far off, if we don’t start preparing in advance, we may find ourselves scrambling to make up for lost time as we approach retirement (or another long-term goal we’ve been wanting to save for). It benefits us to be thoughtful about our future selves and see the big picture for how we will want to use our money in starting a family, checking off our bucket lists, and retiring comfortably. To get the most out of our money, we should think about our short-term needs and our long-term goals simultaneously, not consecutively, and find a way to balance the two.

Long-term thinking is also beneficial in evaluating recurring costs. Treating ourselves to an iced latte every morning from the local specialty roaster may seem like no big deal (it’s only a few bucks), but how will we feel at the end of the year when it adds up to a $1,300 line item for caffeine?

Looking even farther ahead, what do some of our common expenses actually cost us over the course of a decade? Financial blogger and early retirement guru Mr. Money Mustache has a handy trick to easily calculate our 10-year costs: take any weekly expense and multiply it by 752. Before we know it, that’s a $20,000 coffee habit we’re sipping every morning.

Chances are we all have some short-term financial choices that we’d prefer to apply to a larger expense that’s part of our longer-term financial future. By having greater awareness of the long-term cost, we can be more mindful of how we want to spend our money now. Or not spend it, as the case may be.

5. THINK OF SAVING AS BUYING YOUR FREEDOM.

When we set aside money for the future, it can feel like we’re depriving ourselves in the moment. The instant gratification of indulging in life’s luxuries now can feel much more satisfying. As with thinking long-term, it can be hard to comprehend benefits five or more years in the future. We’re much more cognizant of what we could do with that money immediately.

Rather than thinking that we’re depriving ourselves, what if we reframed it as buying our future freedom? By saving now instead of spending, we may be able to stop working sooner, worry less about retirement, and accomplish more of our long-term goals.

6. THINK IN TERMS OF PROGRESS, NOT PERFECTION.

Developing new spending habits and changing our psychology around money doesn’t happen overnight. There will be growing pains where we buy something that we regret or fall into old thought patterns about our finances.

Instead of presuming we’ll be perfect from now on, we can plan for things not going according to the new plan. We can even give ourselves permission to go off script and indulge ourselves every so often, if it allows us to be more mindful of our money the rest of the time.

In other words, just because we slip up in our spending doesn’t mean we should give up on saving. As long as we are mindful of our overall progress, we can make sure we can quickly get back on track to meeting our long-term goals.

7. THINK WITH A GROWTH MINDSET.

This isn’t some advice from The Secret. It’s about our mindset, not magically manifesting money into our bank accounts. And research shows that optimists are more likely to hit their financial goals and experience “high levels of financial wellbeing.”

Personal finance author Ramit Sethi talks about the difference between a growth mindset and a scarcity mindset.

When we think in terms of scarcity, we become protective of what we currently have and earn. Any amount we spend feels like a loss because our finances are finite. We have a limited amount and we put pressure on ourselves to maximize it.

With a growth mindset, we think in terms of possibility and earning potential. If we believe we can earn a promotion and a raise or successfully start a side hustle for extra income, we can simultaneously save more while also feeling less guilty or anxious about our spending.