When we spend, we're not just giving up money. We're also giving up opportunity to use that money for other things: investments or savings goals, for example. In a post for Wise Bread, writer J.D. Roth talks about these "opportunity costs" and says we should consider them to make better spending decisions.

Roth refers to a concept popularized by personal finance writer Ramit Sethi: conscious spending. Essentially, conscious spending is about making non-impulsive spending decisions that are in line with your values.

Roth writes:

"I'm not arguing that you should live like a monk. Far from it. But it's important to consider the opportunity costs of every purchase you make. When you do buy something, you should do so intentionally because the opportunity cost of buying on impulse is enormous."

When you spend consciously, you should ask yourself a few questions, Roth suggests. For example:

  • Why am I buying this? Will it make me happier?
  • Will this help me meet my long-term goals?
  • Would I rather have this now, or would I rather have something bigger and better next year?
  • Are there other, cheaper options?
  • Could I borrow this?
  • Could I buy it used?

While the concept might seem simple, Roth notes that most people tend to spend on reflex, without thinking. For more detail on his explanation, check out the post in its entirety.


Opportunity Costs and Conscious Spending: How Spending $1 Today Can Cost You $10 Tomorrow | Wise Bread

Photo by Fabian Gonzalez.
