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Chicago Tribune: Break the Spell of Spending Mindlessly

September 30, 2013

[This article originally appeared in the Chicago Tribune, September 23, 2013]

In the wake of the Great Recession and now five years removed from the financial industry meltdown, have Americans changed their spending habits?

Experts claimed the recession was so severe that it would alter how consumers spent their money. Perhaps they would be more purposeful, even frugal.

Wendy Philleo says she sees some evidence of that. As executive director of the Center for a New American Dream, she's always talking about redefining what the American Dream is, along with our notion of success "so we're not constantly trying to keep up with the Joneses."

A recent survey found the economic recovery has been uneven. About a quarter of consumers have experienced an improvement in their financial health over the last several years, but 1 in 5 have suffered a decline, according to a study sponsored by Chase Blueprint and completed by Aite Group. It also found evidence that Americans are more disciplined about managing finances and are more financially literate.

"The recent recession forced many consumers to re-evaluate how they approach their financial situations," the study said. Four in 10 consumers are saving more today than they did during the recession because they're spending less, it found.

Ultimately, however, the answer to how Americans spend their money doesn't matter to individuals. That's because personal finance, is, well, personal.

So, the better question is: Are you spending your money the way you want to — on purpose, rather than by accident and habit? Assuming you're not scraping by just to put food on the table, does your spending match your priorities and your personal values?

"It's not necessarily 'Buy nothing,'" Philleo said of mindful spending. "It's, 'Buy differently.'" Maybe you value environmentally friendly products or those made in the USA or items produced locally. Maybe you would like a tropical vacation more than eating every lunch and dinner at a restaurant. Maybe you would trade off some consumption to work less.

As Americans take a break between back-to-school spending and holiday shopping — perhaps while also contemplating a purchase of the newest iPhone and other temptations — here are some notions to consider.

Are the Joneses happy? "I think there's more awareness that more stuff does not make us happy," Philleo said. If the mythical Joneses were being honest, you might hear tales of anxiety and debt, as they shop till they drop and compete in the contest, "whoever dies with the most toys wins."

"Part of it is finding out what the Joneses have to do to keep up that lifestyle," she said. "It can be very stressful."

A growing body of academic research shows that experiences, especially with other people, tend to make us far happier than more stuff. Granted, some people can get a brief "high" from purchasing, but it's fleeting. By contrast, memories of experiences tend to improve over time — as unpleasant events fade and enjoyable parts remain. So perhaps a plane ticket to see a distant friend is better use of money than another pair of shoes in that same color you already have. Money guru Suze Orman doles out financial advice on a variety of topics, but one constant is her mantra, "People first, then money, then things."

Self audit. What do you spend your money on? Until you know that, you won't know whether you're spending money mindfully. Jeff Yeager, author of four books on frugal living, including his latest "How to Retire the Cheapskate Way," suggests performing a "What the heck was I thinking" audit. Twice a year, he examines his statements and receipts, then asks himself, "If I had it to do over again, would I still have spent that money on that thing?" It's a great exercise to find money leaks and identify spending triggers. Ultimately, it will allow you to redirect dollars to things you care more about. The result for Yeager after several audits was "each time my list of spending regrets gets shorter and shorter."

Tuning out temptation. We'd like to think we're immune to advertising pitches, but marketers know otherwise. Acknowledging purchasing pressures and limiting your exposure to them is key to spending your money your way, Philleo said. That might mean muting TV commercials during breaks in shows, staying out of the mall and unsubscribing to catalogs and retailer emails. Opt out of credit offers by calling 1-888-5-OPTOUT. Get off junk mailing lists by going to dmachoice.org. Mobile app PaperKarma receives generally good reviews for reducing unwanted junk mail. Adblock Plus is a popular web browser add-on that blocks advertisements. The National Do Not Call registry is at donotcall.gov or 888-382-1222.

Cooling it. When she desires new clothing she sees in catalogs, Philleo said she cuts out the page and places clippings in a folder. That alone seems to satisfy her urge to splurge. "It's a nice delay strategy," she said. One rule of thumb is to wait a day for every $100 an item costs, giving buying urges time to subside.

Beginning with the end in mind. Setting spending goals sounds like an exercise in drudgery, but it can be fun and fundamental. The easiest way to say no to daily tempting purchases is to have a specific reason to. Your inner voice will say, "I'm not going to buy this new television because I would rather go on the Florida golfing trip with friends in February."

Consult your personal calendar and your bank statement. Despite what you tell others, your true priorities are reflected in how you actually spend your time and your money. Are you satisfied with your priorities? You can begin with the literal end in mind too. Imagine you're on your death bed reflecting on what was important in your life, along with the purchases you made and didn't make. With that perspective, would you change your current spending habits? Another trick is the 10-10-10 rule — in contemplating a purchase, ask yourself how it will affect your life in 10 minutes, 10 months and 10 years.

Asking when enough is enough. Yeager suggests slaying your "enoughasaurus" by asking yourself when you have enough. At what point of accumulating more things can you be content? The question might strike you as profound or dopey, depending on whether you are at a place in life that allows it to resonate. The side benefit of spending more mindfully is that you'll probably end up spending less and saving more, a good formula for weathering the next economic recession.

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