25 September 2020

Five practical steps to Zen peace around your finances. Step Two: Choose where you spend your money

In this series of blogs, Carbon’s Director Glasgow Richard Wadsworth looks at five practical steps to achieve peace of mind around your finances. This is the second of five.

We looked briefly in Step One at discretionary spending. As a starting point, get a figure noted down, thinking about how much you typically spend on holidays, going out, and all the other non-essentials. Looking at your bank statements is a good way to get a fairly accurate handle on this, especially as we increasingly use cards to pay for things, allowing for a better indication as to where our money actually goes. This is made even easier by some banks who offer apps which break your spending into categories. There are also loads of free spreadsheets/planners available, including the one on The Money Advice Service website, so have a look around to see if you think any would be helpful.

Getting an overview of your current financial position is, without a doubt, the single most important step you can take to get control over your finances. Although not a task many relish, countless clients have commented that it has been a revealing and very useful exercise.

So once you have a good picture of your current financial situation – your assets, your essential spending and your discretional spending, the next thing to do is to work out where exactly you want to be spending your money.

Step Two: Choose where you spend your money

As noted in Step One, if you don’t know your income and outgoings, it’s impossible to get a handle on your finances and plan for now and the future. And while obvious, perhaps, the position you want, indeed need to be in over the longer term, is to ensure that your costs are lower than your income. If you save the difference between the two, you can add it to your capital for the future. The subject of how you save that money is for another blog, but it links to Step Three.

If your expenditure exceeds your income, review your expenditure. In putting together your costs you will already be thinking about where your money goes. Now is a great opportunity to decide which items you really value and want to spend money on, which you mindfully want to spend your money on if you like, and which costs you have perhaps mindlessly drifted into incurring.

Regarding the latter, I had a ‘friend’ (not me obviously, I am a rational, disciplined financial planner) who had a bad habit of buying takeaway coffees, and what started as a periodic treat soon drifted into becoming a standard part of his day. And as it became an almost standard part of his day, the real joy of the coffee faded, leaving only the mounting cost, which he was amazed to see equated to the price of a membership at a reasonably luxurious gym.

So what are you spending your money on almost unconsciously? And where would you rather spend your money?

In my next blog, we lift the lid on our money ‘pots’ and make sure we know what to do with them.


Richard Wadsworth is a Director at Carbon and can be contacted at

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