The Simple Dollar has an interesting post today about Frugality and Organization that got me thinking about the connection between our mentality and our finances.
Our state of mind has a tremendous impact on our purchasing decisions because it controls what we perceive to be important. If your time orientation is focused on the short term, paying inflated prices won’t seem as bad as it really is. As long as you can get that wrapping paper before Christmas, or that turkey before Thanksgiving, who cares if it would cost half as much a few days later?
In the same way, the immediate gratification of a purchase can seem to be a much better benefit that it actually is when we’re locked into a short term time orientation. If we look at things with a long term perspective, the disadvantages of frivolous purchases (creating debt or missing out on savings) are much greater than the short term satisfaction of a shiny new toy.
Clearly, the key to making smart spending and savings decisions is to maintain a solid long term time orientation so we can see the impact of our choices on our long term financial health.
Tips for Maintaining a Long Term Time Orientation
- Take the time of to look ahead - One of the main reasons people end up buying at inflated seasonal prices is that they fail to anticipate their seasonal needs and buy when prices are still low. A good exercise to avoid this is making a point of planning out your expenditures at the beginning of each month. Look at your calendar, starting with a week ahead and continuing several months out. What purchases will you need to make? When will prices be at their lowest? A simple thought exercise like this can be a great reminder to buy winter supplies in the summer and vice versa, which can lead to substantial savings.
- Take the time to look back – Along the same lines, it is also beneficial to track and examine all your past expense to recognize where some weak points might be. Were you forced to buy those Halloween decorations at the very last minute? Did you overspend and neglect to add to your savings last month? Tracking how you spend is the best way to understand where your money going so you can take steps to improve your decisions.
- Orient yourself correctly at the moment of decision making – Another great way to keep your priorities inline is to ask yourself before making any important purchase, is this going to benefit me in the long term? Would there be a better time in the future to make this particular purchase? Just asking these simple questions can help you disconnect from the emotion of the moment and recognize the key factors in your decision.
