Change your spending habits to achieve your personal and financial goals The hardest part of personal finance for most people is living within their means. Spreadsheets, budgets, and tables make money management seem like hard work. In The MsSpent Money Guide, readers are introduced to an innovative approach that focuses spending habits to allow for everyday costs and future expenses while finding money for things you really enjoy. MsSpent's bottom line is to help people have a more fulfilling life by helping them clarify their financial goals as well as develop systems and habits that manage their spending. We are all unique and there is no single way to manage money. The MsSpent Money Guide helps each individual discover a way that will work for them. Readers of all ages will benefit from MsSpent's message-if you are clear about your values, you will get more of the life you want with the money you have.

<b>DEBORAH KNUCKEY</b> is a writer, money coach, and speaker. Her "Conscious Spending" approach has been featured in the media, including Oprah and USA Today. Knuckey has an MBA from UCLA and has worked as a consultant at McKinsey & Co. and as a financial reporter at News Corporation. She lives in Washington, D.C. She can be reached at www.deborahknuckey.com.

Introduction

1

(8)

PART ONE Ready to Change: Is Your Hip Pocket Off Balance?

9

(62)

Where Did it All Go? The Unconscious Spending Trap

11

(15)

Conscious Spending: Honoring Your Values

26

(13)

Becoming Conscious: Getting More of What You Want

39

(15)

The Excuse File: Why Unconscious Spending Tempts

54

(17)

PART TWO Set to Spend: The Seven Conscious Spending Categories

71

(134)

Security: Your Financial Foundation

73

(28)

Shelter: Your Home, Sweet Home

101

(22)

Sustenance: Feeding Your Body

123

(17)

Self and Family: Everyday Expenses

140

(23)

Social: Connecting with Others

163

(16)

Society: Giving Back

179

(12)

Soul: Expressing Your Higher Purpose

191

(14)

PART THREE Go: Becoming a Conscious Spender

205

(90)

Starting Out: Creating a Conscious Spending Plan

207

(24)

Keeping Conscious: Designing a New Hip-Pocket Habit

231

(19)

Iceberg Ahead: When You're Weighed Down by Debt

250

(19)

The Big Squeeze: When Your Means are Not Enough

269

(26)

Bibliography

295

(2)

Conscious Spending: Next Steps

297

(4)

Index

301

What is included with this book?

The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

The Used, Rental and eBook copies of this book are not guaranteed to include any supplemental materials. Typically, only the book itself is included. This is true even if the title states it includes any access cards, study guides, lab manuals, CDs, etc.

Chapter One

Where Did It All Go?

The Unconscious

Spending Trap

After my friends finished their slide show, we sat by the fire and reflected on the great scenes they had just shared. For two years Adrienne and Dale had lived their dream. They traveled the globe, seeing every corner of Africa and South America and parts of North America they had not visited before. While their travel style was modest--local pensions and public transportation--they experienced exactly the adventure and exposure to local cultures that they had dreamed of. They had rented out their home while they traveled, and both had taken time out from their careers. Adrienne, a freelance editor, had a good reputation in the industry--she would be remembered if she took some time off. Dale, an engineer, knew his employer valued his skills, but he was willing to risk finding there was no job to come back to after a long journey.

Back home, settled into their jobs, some of their friends who have been treated to the slide show tell Adrienne and Dale that they are lucky. "We're not lucky," Adrienne counters emphatically. "Nearly all of our friends can afford to do what we have done if they spend their money differently." While their friends were buying larger houses, Adrienne and Dale were paying off the mortgage of their nice, but modest, home. While their friends were upgrading to the latest sports utility vehicles, they were making do with their eight-year-old car that was not top of the line even when it was new. When their friends started having kids, they waited. But when it came to travel, they found plenty of money. "We are not lucky; we simply made different choices."

* * *

Over the course of your life, you will probably earn more than a million dollars in today's terms; possibly much more. How will you spend it? Will you consciously use it to live out some of your dreams, or will you unconsciously spend it just living? Will you consciously choose your lifestyle, or will you unconsciously drift into it?

Your Money, Your Choice

Money is one of the greatest tools in life. It can buy convenience, freedom, fun experiences, memorable events, warm surroundings, and all sorts of things that make life more comfortable. But money can also be frittered away, scattered on a pile of small things that have little impact on your life or spent on big-ticket items that have small-ticket results. The way you use your money in your life is up to you.

Some of your spending will be involuntary (taxes ...), and a lot of it will be on the very basics of life (food, shelter, getting to and fro ...). Two choices you have already made impact how you spend a lot of your money: your residence and the car you drive probably account for about half of your total spending. Other circumstances that arise have an impact on how we spend our money or how much money we have to spend. Sometimes we are thrown curveballs that can knock out our best laid plans--divorce, illness, death of a spouse, unemployment, a sick parent, a child with special needs, a natural disaster. There are plenty of situations that can make you feel as if life doesn't offer much choice at all. However, the reality is that you have control over most of the money that goes through your hands.

This choice is an incredible luxury. We live in an era of unprecedented wealth. Incomes are high. The basics of life cost less than ever before. Despite all this wealth, many people often don't even know where their money is going and few if any are happier. If anything, catching up to ever-escalating consumer standards is costing us inner peace. And for many of us, it is also costing financial security: we are getting in debt just to keep up.

What Do You Really Want?

The key to getting more of what you want is knowing what it is that you do want. I know this sounds obvious, but how long has it been since you have stopped and asked yourself what you really want from life? It's very easy to be caught up in day-to-day living and never step back and take a look at all the decisions you make about how you live your life and how you spend your money. Life gets so busy, and our everyday path gets so well worn, it's easy to forget to stop and ask ourselves this critical question: What do I really want?

To help you arrive at the answer to that question, ask yourself the following three questions:

1. If you think of the last $5,000 that you earned, what did you spend it on?

2. If you were given $5,000 unexpectedly, what would you spend it on?

3. If you were given $5,000 with the express instruction that you must spend it on something you really enjoy, what would you spend it on?

If you are like most of the people who take my money coaching classes, your first list was probably as dull as a shopping list: the mortgage or rent, utility bills, food, a family member's birthday gift. The second list probably began to reflect some of the pent-up demand in your life: a debt to pay off, a class you want to take, an upgrade to your home you have been putting off. And the final list probably reflects some of your true passions, true ways of expressing yourself: travel to a place that fascinates you, a class that will help you change careers, a vacation with people you love, a piece of furniture that will make your home more nurturing, or an electronic system to play music that inspires you. The list could go on. My students have dreamed of everything from touring Italy's wine region to buying a specialized tool for making jigsaw puzzles.

How can you manage your money so that you have enough left after everyday spending to pursue some of your dreams? How do you keep hold of the big goals in your life when you are mired in the little everyday tasks?

Introduction to Conscious Spending

Conscious Spending is being aware of how you spend your money and how well that spending aligns with your personal values. The next sentence is the key to the rest of the book, so read it carefully. Conscious Spending works by minimizing the money you spend on things you enjoy less, in order to free up money for things you enjoy more . That's all Conscious Spending is: moving money from unfun things that drain your resources, and putting it in the pleasure zone. Conscious Spending is the opposite of the unaware "frittering away" of Unconscious Spending.

Why spend so much of your life working if you don't use your earnings in a way that makes you most happy? Even if you love your job, most work is simply not that much fun that we'd do it purely for the joy of it. So take the payment for your work and put it to your own best use. This concept is not selfish and does not mean that you are only spending money on frivolous things. Conscious Spending may include donating money to charity, holding a great party for your friends and family, going back to school purely for the joy of learning, buying a home in a neighborhood with good schools, or supporting your parents. Of course, Conscious Spending may also include traveling to the ends of the earth, buying a really flashy car, eating in the finest restaurants, or finding out whether diamonds are your best friend (I figure you have to have quite a few before you can really know). Most people end up with a mix of the heartfelt and the fun. Does this make some people good and others selfish? I don't think so. It simply means people have different values. And I'm not going to give you grief if your values are not my values, as long as you promise not to give me grief because my values are not yours. We're different, and that's what makes the tapestry of life particularly colorful.

The essence of Conscious Spending is ensuring that your money is spent in a way that supports you. What counts is congruency: whether your spending fits your wants and your values. Some of this involves guts. If your values are different from those of your friends, colleagues, and neighbors, then the way you use your money will differ. Driving an old car so you can travel overseas every year may feel like rebellion when all your friends are driving the latest model cars. The combination that feels right to you may be very different from some hypothetical norm that you see on television. Living in a way that truly reflects your own values--not those of your peer group, not those of your neighbors, but your own unique mix--is a radical act.

Conscious Spending is easier if you are single and making decisions for yourself than if you are in a relationship and making decisions for a household; however, the essence is the same. As a couple or a family, you may even find that the Conscious Spending approach diffuses some age-old arguments by focusing on your underlying personal values, not on the shopping lists in your head.

If your money management is not focused on getting what you really want, you are an Unconscious Spender. Unconscious Spenders are not necessarily overspenders, compulsive spenders, or irrational spenders. Some may even be great at saving money. They are simply spenders who are not really conscious of where their money goes. They don't stop to ask what they want their money to do for them today and throughout their lives. They don't actively make choices that will bring them as much happiness as possible. The result, not surprisingly, is that Unconscious Spenders don't get as much of what they want as they could.

The Cost of Unconscious Spending

So what is the cost of Unconscious Spending? There is a significant emotional cost that comes from not spending money in a way that is aligned with your true personal values. This may not be the sort of angst that keeps you awake at night, wringing your hands; it is more subtle than that. What is the cost of never having enough money to be what you would really love to be, do what you've always wanted to do, or have what you truly want? What is the cost of the energy you spend maintaining a lifestyle that does not bring you deep happiness? What is the cost of working hard but still not having what you want at the end of the day? What is the cost of not fulfilling your dreams or expressing yourself fully? What is the cost of getting some, but never enough, of what you enjoy?

Should we simply aim to earn more? The difficult part about focusing on earning is that often the goal we are aiming for moves. While singer k.d. lang's song "Constant Craving" was written about romance rather than money, the title sums up how most of us feel in a consumer-oriented society. At $35,000 a year, it seems that $45,000 a year would be enough to meet all of the unsatisfied wants. Yet when that new level is reached, there seems to be another goal that is further out. What is the emotional cost of being constantly aware of what we don't have rather than simply grateful for all we do have?

As I began teaching people about Conscious Spending, I discovered that there is a very different essence in the wanting that you feel when you are expressing your personal values and the wanting you feel when you are out of touch with your values. The wanting that comes from expressing personal values doesn't have the same level of neediness under it. It has less of the jabbing, needling quality of unaligned wants. It has the quality of a person living comfortably in his or her own skin. The wanting that is not aligned with your values has a begging five-year-old air to it, with a pout and a tantrum, demanding: "I want a bigger car. My life will not be complete without a bigger car!" It has an undercurrent of trying to fill an emotional hole.

Most of us could create a list as long as our arm of things that we would enjoy owning. Does this mean that we are all doomed to a lifetime of constantly wanting the next thing over the horizon? Yes and no. Unconscious Spending sometimes comes from trying to fill the gaps in your sense of self with a whole pile of stuff. Conscious Spending is simply expressing your sense of self through how you use your money. The more secure you are in your sense of self, the more optional the pile of stuff becomes. It doesn't mean you won't want anything, just that having more is the icing on the cake.

Conscious Spending is about being more of who you are, honoring what you care about, taking responsibility for how you live today and how you will live tomorrow. To succeed, you need to know yourself well enough to know what will make your life rich and interesting, uniquely yours, and deeply satisfying.

Imagine feeling content, a foreign feeling for many people. Conscious Spending helps you move toward contentment. When I first started teaching this approach, I thought I was simply teaching people how to better manage their money. I was surprised how many students came back with stories of how their lives had changed when they stopped and focused on what they really wanted. They discovered what I hadn't realized: Conscious Spending is about first filling yourself from the inside, as much as it is about having nice things around you.

* * *

As Tracy moved her spending to a more conscious place, she also realized how much her past spending had been coming from a place of gaining approval from others. "I realized I bought clothes because I was trying to impress somebody: so much of it was about how I wanted others to perceive me. I wanted them to think I look good in this. Some of that feeling is OK, but a lot of it? I don't want that feeling to be there. I want to buy stuff that I feel good in. I want to cut out that extra layer of approval and just ask: Do I like this? Do I look good in this?" It was the act of being conscious around her spending that moved her to focus on expressing herself.

* * *

What Do You Really Want?

Becoming a Conscious Spender depends on the one critical step of getting to know what you really want. Let's look at two components of what you want: your values and your dreams.

Values are the underlying qualities that you hold sacred in your life. They are an immutable part of what makes you you . Your values are the list of qualities that you would use to describe who you truly are: loyal, adventurous, independent, successful, honest, fun loving, caring, connected, creative, dependable, and so on. There is no neat list to pick and choose from, and it is important not to let the words get in the way. It is more important to get clear on what small handful of values is critical to your being you.

Values are not things, but the things that you buy can express them. The way that you express your values, however, can be as complex and individual as you are. A quick look at car ads will show you how one car is designed to appeal to a person who values adventurousness, whereas another is designed to appeal to a person who values achievement. However, although one car may be designed to appeal to people who value adventurousness, all adventurous people are not going to express that value in the same way. One person may express his adventurousness with a rugged SUV that never goes off road. Another may be equally happy expressing her adventurousness through rugged travel in far corners of the world. Values are not about what you do or have, but who you are. Conscious Spending involves making choices with an awareness of what values you express through those choices. By stripping back your wants to the underlying values, you are removing the shopping list and returning to the self-expression.

Whereas values are qualities, dreams are a specific way that you would like to express a value that is very important to you. For example, a client has a very strong value around being close to her family. One specific way that she dreams of expressing that value is by having a farm in the country where her children and grandchildren could spend summers and holidays with her every year. One of my top values is a love of adventure, and a dream I have is to get my pilot's license and fly all over Africa.

Exercise: Defining the Life You Want

* * *

It is very easy to get caught up in the race for new and better possessions and experiences. Yet when all is said and done, some of the most satisfying things in life come not from what you owned or what you did, but who you were.

Go to a quiet place where you won't be disturbed. Close your eyes and quiet your mind. When you are relaxed, imagine that you are at your 80th birthday party and all the people you love and care for in your life are there, along with others whose lives you have touched. Imagine the speeches that each person would make. Take 10 minutes to write everything that you would like to be remembered for by the people who you care about. Once you have the list, mark next to each item whether it is something you have (a possession), something you do (an experience), or something you are (a personality trait). For example, your list might include: being a great parent (personality trait), traveling the world (experience), and owning a beautiful home (possession). From this perspective, which items are most important? Which items most defines who you are? What do you care about more than anything else in the world? What legacy do you want to leave?

As you look at the items that are most important to you in your life, list the values that underlie them. Prioritize your values, getting clear about the top three or four. One way to get down to these core values is to take a longer list of values and ask yourself: "If I could not be _____, would I know how to be me?" It doesn't matter if you are not certain about the list. As you create your own Conscious Spending Plan following the guidance given in Chapter 12, you will choose between different things that you spend money on and as you do that, you will be able to feel out which of the values are most important to you.

(Continues...)