Mindful Spending: Can Awareness of Emotions Improve Financial Wellness?

In today’s fast-paced consumerist society, spending is sometimes less about basic needs and more about chasing wants. We are inundated with advertising messages urging us to buy, upgrade, and consume. Amid this constant pressure, there is growing traction for the movement toward mindful spending––a deliberate, values-driven approach to money that prioritises long-term wellbeing over impulsive consumption.

Indeed, being mindful about spending is increasingly recognised as an important skill for financial health and peace of mind in the modern world.

Table of contents

• Understanding mindful spending
• Emotions drive financial decisions
• Why mindful spending matters today
• Common emotional spending triggers
• Techniques to practice mindful spending
• Lasting benefits for financial wellness

Understanding mindful spending

Being a mindful spender means being conscious of not only how much money you might be spending but also how you are spending it. This may involve examining your priorities, making a distinction between needs and wants, and spending your money on what you truly care about.

When you do this, you might find it easier to resist spending unnecessarily, which may potentially have a favourable impact on financial wellness.

Read Also: Behavioral Finance: Meaning, Types, and Its Importance

Emotions drive financial decisions

Emotions might often influence our financial decisions and may hinder our ability to think rationally when purchasing. Common biases such as loss aversion and overconfidence may make it hard for people to act in accordance with their underlying financial objectives. The more one is aware of the pull of emotions, the more one might pause in that moment and question whether the spend is truly important.

Why mindful spending matters today

Mindful spending has become increasingly important in our current consumer culture because the pressure to spend impulsively is stronger than ever. E-commerce and one-click digital payments have made the process so easy that spending might not even require a second thought. Personalised advertisements and countless sales and promotions online entice us to buy “right now”, resulting in many people filling their shopping carts with items they might not have originally intended to purchase.

The trend of social media influencer shopping hauls, constantly upgrading to the latest gadgets, and keeping up with fashion fads creates a sense that we must always be buying—or potentially risk missing out—also referred to as FOMO (fear of missing out).

The consumerism might affect people's real financial wellbeing. Mindful spending addresses this problem by returning control of your money to you. By spending intentionally and purposefully, you may be able to eliminate buyers’ remorse and reduce the likelihood of being in a high-interest debt situation.

By cutting back on unnecessary expenses, you could build an emergency fund and redirect extra money toward your other financial goals. Overall, reducing wasteful spending may free up resources to help potentially secure your future.

Common emotional spending triggers

Many day-to-day spending decisions might be driven by emotions more than needs. Some common triggers that may lead to overspending are:

• Stress and emotions: High stress or feeling low might push people into shopping to feel better. This impulsive spending may lift the mood briefly, but it’s only a temporary fix.
• Social pressures: Social situations and culture might also trigger overspending. Whether it’s a wedding or buying the latest gadget due to peer pressure, the desire to conform might lead to unplanned expenses.
• Easy digital spending: E-commerce apps and credit cards make spending almost effortless. Not handing over physical cash, might reduce the pain of paying and may encourage more impulsive purchases.

Read Also: Confirmation Bias: Behavioural Finance and Mutual Funds

Techniques to practice mindful spending

• Identify triggers: It is advised to track your spending urges to spot patterns. Note when you feel a sudden desire to buy––is it after a stressful day, when feeling lonely or when browsing an online sale? Identifying what provokes spending, whether emotions or environments, may be the first step to controlling it.
• Differentiate needs vs wants: Before you buy, pause to ask if the item is a need or simply a want. This habit may make you more conscious of spending. For things that fall in the want category, it is advised to consider how buying them might set you back from your financial goals.
• Practice mindful pausing: When an urge to splurge strikes, it is recommended to take a step back. Give yourself a cooling-off period before deciding. Often, you may find that the impulse passes, saving you from an unnecessary purchase. Whenever you are anxious, using mindfulness techniques like deep breathing or a short meditation might also help build impulse control.

Lasting benefits for financial wellness

As time passes, practising intentional spending may have real potential benefits. You might save more, have less potential debt, and feel less stressed about financial matters. You might also develop confidence in dealing with money and have a healthier attitude towards finances. By cutting back on unnecessary expenses, you may be able to build an emergency fund and redirect extra money toward your other financial goals. Overall, reducing wasteful spending might free up resources to secure your future.

Read Also: How Behavioural Nudges Help Financial Decisions

Conclusion

Understanding the emotions behind spending is important. Mindful spending does not mean denying yourself all pleasures or not spending money. It just means spending your money on the things that really matter to you. It might help you live within your means while having a rewarding life. Over time, spending according to your values and goals may gradually improve your overall financial wellbeing.

At Bajaj Finserv AMC, we recognise that emotions are the cornerstone of investor behaviour – not just for investors but for investment professionals too. That’s why, behavioural finance is at the heart of our investment philosophy, InQuBe, which combines the Information Edge, Quantitative Edge and Behavioural Edge. By understanding, tracking and monitoring market sentiments and our own investment biases, we seek to make mindful and strategic investment decisions. Get the Behavioural edge by investing with Bajaj Finserv AMC. Read more about InQuBe here.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed. The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.