How to Be More Intentional With Your Money
Money management is all about how we allocate finite resources.
There was a time when I wasn’t very intentional with my money. Anyone who’s not intentional with their money will default to whatever money behavior they're naturally inclined toward. For some people that’s spending. For others, it’s saving. Luckily, I’m naturally a saver, so it could have been worse. Still, if I had more self-awareness about how I managed my money, I might have invested sooner. I might have given more thought to what my financial goals were.
A conscious, intentional approach is one of the keys to taking control of your money. If you don’t have a plan for how you spend, save and invest, what you do with money will be dictated by your natural inclinations or outside influences, like friends, ads or social pressures.
With that in mind, here’s how you can be more intentional with your money:
Know Your Goals
Intentionality begins with knowing your goals. Maybe you want to travel the world. If so, you’re probably less likely to spend money on a nice apartment or house and more money toward traveling. If you know you want to achieve financial independence by age 40 and you know you need to save 50% of your income to achieve that, all your other habits will be informed by this goal.
You’ll always know the why behind the money decisions you’re making. You’ll know why you choose to live in the same modest apartment: because you enjoy the extra opportunities to travel. Or you’ll know why you allocate a certain percentage of your income to investments instead of spending it on consumption now: because you’ve concluded you value financial independence over short-term spending. If you know your goals it’s easier to align your behavior with them.
Track Everything With a Budget
You can’t be intentional if you don’t understand how much money is coming into your bank account and how much is leaving every month. The first step is to track every inflow and every outflow. You should know things like how much money you spent eating out last month, how much you spent on subscriptions, or what percent of your take-home pay went to savings.
There are a lot of budget systems out there, such as the 50/30/20 budget, the envelope system and the zero-based budget. It really doesn’t matter which one you use, as long as it works for you. A budget is the best tool for tracking your income, spending and savings.
Plan Your Wants
When you make discretionary purchases, you should have these planned in advance. This level of intentionality will help you avoid impulse buying. So instead of eating fast food because you haven’t properly meal planned, make the conscious choice to eat out x days a week and to spend x dollars. If you enjoy going to a particular restaurant and that’s something that you want to spend money on, price it into your budget at the beginning of the month.
Planning purchases that are closer to wants than needs alongside your non-negotiable expenses and what you need to save and invest helps you spend in a sustainable, guilt-free way.
Spend According to Your Values
On a related note, your spending should ideally reflect your values. So the money you spend in excess of what you need to survive should be on things you really care about. This will help avoid mindless spending you later regret. If you don’t truly value something, why spend money on it? Your money is a scarce resource.
Give yourself permission to splurge on things you really care about. There’s a difference between mindless spending that leaves you unfulfilled and broke and carefully planned splurging on things you love.
People often spend in ways that don’t reflect their values when they feel some outside pressure to spend, such as friends that want to do expensive activities you don’t have money for. Or social pressure to keep up certain appearances. Focusing on what you value helps you become more intentional with how you spend.
Save and Invest Intentionally
Intentionality isn’t just about how you spend, but also about how you save and invest. If you don’t understand why you’re saving or investing and how long you’re saving or investing for, you might end up putting money in a savings account that should really go into long-term investments like index funds. Or you could inappropriately expose yourself to more risk by investing in long-term assets for short-term goals.
Saving and investing intentionally helps ensure you have enough money to reach your goals when the time comes. Intentional investing can also help you steer clear of high-fee investments or taking financial advice without considering if it’s useful.
Money management is all about how we allocate finite resources. If you aren’t doing this intentionally and mindfully, you could end up in a place you don’t want to be. Time is another major finite resource. Everything in this list could be applied to how you spend your time as well.
When it comes to money, there often aren’t right or wrong answers for everyone. You alone can decide what your goals are, what you value and how you allocate your money. Just do so intentionally.