Buzz
We often view money through a lens of logic, leaving emotions out of the equation. However, our emotional state plays a much bigger role in financial decisions than we might think. Gratitude, for instance, can have a profound impact on our spending habits (and even our investment strategies). Here's a personal story of how it helped me improve my own financial approach.
Exploring the Connection Between Gratitude and Financial Decisions
In the study titled Gratitude: A Tool for Reducing Economic Impatience, researchers examined the influence of gratitude on financial choices. Participants were asked to write about an experience that induced one of three emotional states: happiness, gratitude, or a neutral feeling. Afterward, they were presented with financial choices—either receiving a small sum of money immediately or waiting for a larger amount later. Unsurprisingly, those who felt gratitude were more likely to choose the delayed gratification option, showing a preference for long-term benefits over instant rewards.
In short, the study concluded that participants who were primed with gratitude were significantly more willing to delay immediate rewards in favor of receiving a larger sum later.
This looks great in a chart, but how does it play out in real life?
I’ve always considered myself grateful for the things I have, even during times when those things were scarce. However, in recent years, I’ve come to realize that while I may be passively grateful, my focus has often been on what I don’t have. This shift in focus has had a noticeable effect on my finances, particularly in terms of my spending habits.
The Downside of Setting Goals
Goals are fantastic, and I’ve been a big believer in them for as long as I can remember. From a young age, I’ve had financial goals. Growing up in poverty, my main goal was simply not to be poor anymore. After finishing college, that broad goal became more specific, including the following objectives:
Secure a salaried position
Eliminate debt
Maintain a debt-free life
Build savings
Focusing on What’s Missing
A lot of those goals were motivated by fear. I was constantly worried that I wouldn’t have enough.
Admittedly, that fear was effective in helping me get out of debt. But over time, it also prevented me from enjoying the life I had worked so hard to build. I did land a salaried job and saved for emergencies, but I continued to hoard my money and lived in constant anxiety about losing it all. This fear messed with my finances in several ways:
I over-saved. I deposited too much money into my savings account each payday, misjudged my expenses, and ended up overdrafting.
I avoided learning about investing because I feared losing money.
I never asked for a raise because I was afraid my boss would reprimand me.
Fear and finances is a whole different topic. The main point here is that I was so consumed by my goals that I didn’t take the time to appreciate what I already had. I focused too much on what I lacked and on all the what-ifs.
Focusing on What Lies Ahead
Obsessing over goals isn’t always driven by fear. Sometimes, it’s simply the desire for more. As my financial situation improved and I let go of some of my worries, I began shifting my focus from what I thought I needed to what I truly wanted.
Having aspirations is great, but as we’ve discussed before, it’s often more beneficial to concentrate on the process instead. To put it simply, it’s about enjoying the journey, not just aiming for the destination.
You might think: that mindset sounds good in theory, but how does it actually impact your finances?
To start, focusing on the process can make you more productive. You’re addressing the tangible present instead of getting lost in abstract future goals. This approach can also improve your problem-solving skills. Studies show that concentrating on the present, rather than the future, can lead to better saving habits.
It makes sense when you think about it. When you’re focused on the present, your financial decisions become more grounded. Here’s an example: for years, I didn’t invest or save for retirement. My future goals revolved around landing a job that paid me a huge salary. I thought I’d deal with those things later. I put too much pressure on the future without considering the present—that by not investing early, I was missing out on the power of compound interest.
The Consumer Mindset
By prioritizing the future over the present, I found myself constantly chasing after the elusive carrot. I wanted more; I was a consumer. I wasn’t unhappy, but I felt something was missing. On a subconscious level, I thought a bigger apartment or a nicer wardrobe could fix that dissatisfaction. That’s the trap of lifestyle inflation. You watch HGTV for hours and think, ‘I want to buy a home one day. Let me check out some listings on Trulia. Okay, that’s way out of my budget, but I can afford a trip to IKEA!’
I’ve always been decent at controlling it, but I’ve still ended up buying plenty of unnecessary things due to that subtle feeling of lack.
There’s nothing wrong with buying things you don’t need. But for me, the real issue was the mindless part. I didn’t stop to think about my spending habits or what was influencing them.
How I Shifted My Focus
When I shifted my focus from the future to the present and started appreciating what I already had, several things improved:
I stopped making impulse purchases on unnecessary items.
I had more money available to save.
I made better investment choices and began fully funding my IRA.
I gained a sense of financial security (which, for me, is the primary reason to save).
I became a more involved (and thus more valuable) employee.
However, shifting your mindset is much easier said than done. For a time, I made the effort, but nothing seemed to change. I kept a gratitude journal, read about and tried methods to curb impulsive spending. But a few things eventually made all the difference.
My Biggest Financial Fear Came True
I lost my job. This had always been one of my biggest financial fears, and it came true. I went through all the stages of grief. Once I worked through the bad feelings, I came to some realizations that led to a deep sense of gratitude:
I spent years turning a job I truly enjoyed into something miserable by obsessing over it constantly.
I had an emergency fund. My past fear-driven decisions actually paid off, and I was much less stressed than I would have been without it.
My job doesn’t define me. I lost it, but I’m still here, still me.
My job loss wasn’t part of some grand plan. It simply happened, because sometimes, life just does. When life throws curveballs my way, I still have a roof over my head and food to eat. For many people, though, “life happens” can mean real hardship and suffering.
I didn’t have much control over this particular situation, but there were other areas where I could shift my focus.
I Set Short-Term Goals
I read Thorin Kloskowski’s article about creating a hierarchy of goals. I really resonated with the idea of setting smaller, more immediate goals that are aligned with broader life objectives. This approach takes an abstract concept and turns it into something actionable. It’s a fantastic way to connect your present self to your future self. In personal finance, one of the biggest challenges is seeing our future self as a stranger. We often plan for an idealized version of our future self, such as the “perfect future self.”
I applied Thorin's advice to my own weekly task list. I began breaking my larger goals down into smaller, short-term objectives. For instance, I changed my Mint goal from "Save $50,000 in 5-10 years" to "Save $5,000 this year." I also adjusted both the time frame and the amount as needed. At the time, I didn’t realize it, but I applied the same strategy when paying off my debt. It's all about creating smaller milestones.
Achieving short-term goals brings me satisfaction. It makes me appreciate my progress. It helps me realize that I am already living my goals—focusing on the journey, not just the end result.
I Practiced Mindful Spending
Being a mindful consumer essentially means practicing frugality. As Ramit Sethi puts it:
Frugality is simply about spending lavishly on the things you love the most, and ruthlessly cutting back on the things you don't care about.
When you're intentional with your spending, you develop a deeper sense of appreciation for your money and the things you purchase. Clothing isn't something I value enough to splurge on, but travel is. Recognizing this helps me make smarter spending decisions.
There are countless strategies for practicing mindful consumption, and their effectiveness varies from person to person. For me, the "envelope method" has been a reliable tool when I need to reel in my spending. If you're unfamiliar with it, it involves using cash instead of debit or credit cards to cover expenses. Handling something physical helps me reflect more carefully on my purchases.
Identifying my consumer triggers was also a game-changer. I reflected on the factors that prompted me to make purchases. HGTV was one of the biggest influences. The Marshall's near my place doesn’t help either. I've come to realize that certain places like that make me forget what I already own and focus only on what I want. Though I still occasionally get tempted by Marshall's, the key difference now is: I’m conscious of my actions, and I know that these items rarely fall into my "love enough to spend extravagantly" category.
There are still aspects of my life I wish were different. I continue to work towards numerous goals, both financially and otherwise. But in the meantime, practicing gratitude for what I have now has significantly improved my spending habits. And, more importantly, it's contributed to a greater sense of personal satisfaction.
Photos by k rupp, Stefan Neuweger, and Sebastiaan ter Burg.
