Ride the Virtuous Cycle of Mindful Personal Finances

As a successful small business owner and early retiree, my life is a good example of the cause and effect between the daily practice of mindfulness and personal finances.  From my perspective, it seems strange that the mental and physical health benefits of mindfulness are routinely celebrated, but the “financial health” benefits of mindfulness are hardly discussed.  Perhaps some people feel that bringing up the topic of money cheapens the role of mindfulness in a fulfilling life.  Or perhaps discussing money immediately raises the distracting concern that something is being marketed.  But in the reality of our society, healthy finances are a bedrock foundation that supports almost all other aspects of a fulfilling life including physical health, mental health, relationships, and even our capacity to love.  Let me assure you that I’m not trying to sell you anything, other than an idea.  That idea is:

  • Mindfulness and healthy finances create a virtuous cycle, where 1) mindfulness improves your finances, and 2) improved finances gives you more freedom to pursue a more mindful, compassionate, and fulfilling life.

The steps in this virtuous cycle are shown in this graphic.


Let’s take a closer look at how this virtuous cycle works.

Financial Awareness

Mindfulness is all about awareness.  When you’re mindful, your internal and external senses perceive what’s happening and what you’re doing and thinking at the present moment.  Meditation is the practice that cultivates your awareness in everyday life, just as the concert pianist practices alone each day to prepare for on-stage performance.  Practiced mindfulness promotes awareness in every dimension of your life, and given that money plays some role in all of our lives, personal finances is no exception.  An analogy about financial awareness might be helpful.

In my second year of college, I bought an ancient pale-lime Buick Regal.  Beyond the weird color, I liked to think the car had a roguish personality from the combination of its powerful gas-guzzling engine, an array of failing and broken parts, and a distinctive interior odor.  The radio was held in place by styrofoam and duct tape, only one windshield wiper functioned consistently, and the radiator slowly leaked.  Over time, the instrument panel started to malfunction too.  At first the gas gauge stopped working.  Then the tachometer and speedometer broke in quick succession.  Finally, even the odometer stopped turning, which I viewed as a plus from a potential resale standpoint.  And because my gas money was mostly sporadic coins from friends bumming rides, I usually had only a vague idea of when and how much gas I’d last put in the tank.  In short, the lack of awareness involved with driving that car was stressful, but it was still slightly better than walking.

Amazingly, a large swath of Americans drive a personal finance car that looks just like my stressful old Buick.  Money is the gas that makes your financial life go, and yet, there’s a startling lack of awareness of the most common money topics.

Emergency fund: Do you have enough gas to make it to the next filling station? – A Bankrate survey found that only 31% of Americans have enough saved to cover six months’ worth of expenses, which is a commonly cited acceptable emergency fund.

Spending: How much gas are you using? – According to a Gallup survey, only 32% of Americans track their household spending in even simple categories like housing, transportation, food, health care, entertainment, clothes, etc.  Most Americans have no “gas gauge” at all.

Waste: Could you get the same stuff done with a more fuel-efficient car? – In a survey by Hloom, 80% of the respondents admitted they wasted money on: eating out, unconsumed food, choices at the grocery store, credit card interest, etc.  While “waste” is in the eye of the beholder, this shows some awareness of the issue.  But this study did not ask people to define the amount of money wasted in each category.  And because few people track their spending, it seems unlikely that most people would be able to report where they waste the most money.

Income: When’s your next refueling and how much can you put in the tank?  Because most people get a regular paycheck and file an income tax return, income awareness in America is relatively high.  Even so, many people have a poor understanding of how their income might vary due to unexpected events such as: a lay off, work injury, sickness, other health issues, or pregnancy.  One study in the American Journal of Industrial Medicine found that for 10 years after an injury, injured workers had annual earnings growth that was $1,200 to $3,700 less than for uninjured workers.

Budget: Are you using more gas than you put in the tank?  According to an NFCC survey, 61% of Americans don’t have a household budget of any kind, which means they have no clear idea of their balance (or imbalance) of income and spending.

Saving and investing for retirement: Do you have some extra gas stored for later?  (Admittedly, my analogy is breaking down a bit because most people don’t store much gas at home.)  A Federal Reserve Study found that the retirement savings was less than $50,000 for 70% of American couples and was zero for 33% of couples.

Net worth: How much gas is in your tank? – In one survey by GOBankingRates, 40% of the respondents couldn’t correctly define personal net worth, which means they probably have only a poor idea of their true net worth.  This casts doubt on the accuracy of studies that provide U.S. net worth statistics based on surveys.

Because of this vast lack of financial awareness, most Americans carry a significant amount of debt and many use credit cards and other loans to maintain a negative net worth.  When I tried several times to drive with negative gas in my Buick tank, the laws of thermodynamics forced me to walk.

As you become more mindful, it becomes increasingly difficult to ignore basic financial parameters like how much money your brining in, spending, wasting, and saving.  To the extent you’re not tracking these things now, mindfulness repairs your faulty dashboard instruments.  Or perhaps more accurately, mindfulness opens your eyes to the instrument readouts that were available all along.  In my experience, the increased awareness of your finances is a near automatic benefit of increased mindfulness.  You don’t have to maintain complex lists, do additional homework, or read a bunch of finance books to achieve this increased awareness, although a bit of record keeping and education is going to help too.

Financial Stress, Fear, and Desire

Have you ever wondered why so many people don’t track simple things like their spending?  Many commentators point to a lack of knowledge or laziness.  But that seems overly simplistic.  In college, I didn’t need an automotive class to know the benefits of a functional dashboard.  Driving blind, whether it’s in a car or steering your finances, is clearly a stressful hassle that most people would prefer to avoid.  Anyone living paycheck-to-paycheck will emphasize the stress involved with that life, and no one that I know accepts stress out of sheer laziness.

A much more likely explanation is that many people are simply too afraid to confront their true financial situation.  The Buddhist monk Thich Nhat Hanh observed:


If you track all your spending, compare it to your income, and prepare budgets and savings plans accordingly, you will relieve much of your ongoing financial stress and trade it for a more responsible new life.  It’s easy to fret that your new life might be one filled with deprivation and hard work.  It’s easy to fear potentially giving up things you desire (rather than “desire”, most people say, “want”, “deserve”, or “need”).  So instead, many people just continue to pursue things they can’t afford and settle for the suffering caused by their financial blindness.  It’s the blurred lens of fear that makes this myopic outlook appear justified.

Mindfulness and Handling Emotions

You probably already know that the birth of mindfulness more than 2500 years ago was sparked by the search for ways to address these sorts of unproductive fears and desires.  So, what is it about mindfulness that helps us get past these emotions and proceed to a more fulfilling life, both financially and otherwise?  Consider how fear and desire occur.

Mindfulness is About Now – First, although we often assume fear is about real and present dangers, if you stop and think, most of the time we wrangle with fear it’s not because of something happening right now.  Sure, at some point a mugger may appear and demand your wallet, and you’re fearful in that moment.  But most of the time, we worry about things that might happen in the future, like that new life of potential deprivation and hard work.  Mark Twain was supposed to have said:


Similarly, you can’t really desire something you already have.  Desire is about something you might obtain in the future.  The desire to acquire new things and experiences in the future drives us to do things that are sometimes harmful now, like going into debt.  It’s like chasing a loose $100 bill blown by the wind towards a busy intersection.  Perhaps you’ll get to buy something new and shiny with that Franklin, or perhaps you’ll just get run over.

Mindfulness is all about being fully aware of the present moment as opposed to dwelling on potential future events (or past mistakes).  If you focus on the present moment, it’s actually pretty hard to generate a lot of worry about potential future events or actively desire something that you could obtain tomorrow.

One of the key reasons that people are drawn to mindfulness is to reduce the daily stress related to these types of forward-looking emotions.  Mindful people generally report less fear about the future and more satisfaction with what they already have.  These findings are consistent with my personal experience, talks I’ve had with people who practice mindfulness, and similar reports from books I’ve noted in other articles.  However, you shouldn’t simply take the experiences of others as proof of reality.  The best evidence that mindfulness will help reduce your fear and desires is to try daily meditation for a while, and see if you feel less stress about the future in general.  Or if you already practice meditation, try insight meditation on specific fears you have about money or specific material desires.  I think you’ll observe that many of your money fears and desires assume the occurrence of future events that may never happen.  For example, you might buy a shiny new car assuming that you’ll be happy driving it, only to find it’s a lemon that’s constantly in the shop.

Mindfulness Is Non-Judgmental – Staying in the present moment certainly helps reduce the amount of time we spend worrying about and desiring things in the future.  But life inevitably presents us with unpleasant experiences that we have to address right now.  Mike Tyson is supposed to have said:


As difficult as we find not obsessing about the future, we find it even harder to stay calm when the future arrives in a nasty form.

Mindfulness is also inherently about accepting what is happening now without judgment.  Why is a barking dog a noise, but chirping birds sound beautiful?  It’s your judgment that differentiates.  It’s that internal dialogue about the “infernal racket” of the dog that likely represents 90% of the “problem” you have with the barking.  It’s your cultural conditioning (probably from all those singing birds in Disney movies) that tells you bird sounds are beautiful.  In reality, they’re both just animal noises.

Similarly, what if your car breaks down, and you have to walk on a muddy, slippery path through the pouring cold rain to get help?  (Let’s also say your cell phone is dead for the sake of argument.)  That’s a story of terrible hardship you will probably be telling your friends for weeks.  But when you’re actually walking through the cold rain, what makes it so bad?  It’s your internal dialogue telling you, “This is the worst experience ever!”, “I can’t believe how cold I am!”, and one of my favorites, “I don’t deserve this!”  Yet a multitude of people enjoy a nearly identical experience in the form of extreme obstacle course races.  These people pay entrance fees and find pleasure in navigating obstacles of icy water, mud, barbed wire, fire, and live electrical wires to the point of exhaustion and possible injury.  The key difference is they judge those experiences as fun instead of as a hardship.  When you are deeply mindful, a barking dog can sound like beautiful music!  Buddhism, the origin of mindfulness, is full of such paradoxes.

A story from Eckhart Tolle’s book, A New Earth, about a “wise man” helps to highlight a mindful suspension of judgment.  (I’m sure Tolle got this story from someplace else, but I didn’t try to determine the original source).


The wise man’s “maybe” signifies a refusal to judge anything that happens or may happen, even when most of us would judge these as very momentous events.  In refusing to judge the events, it frees the wise man from much of the emotional turmoil of daily life.

Going back to the Mike Tyson boxing quote, if you get punched in the face by a financial set back, the “trick” is to recognize the pain but not let your judgment about that pain overwhelm you.  If you’ve never been in a boxing match or a fight, this is almost impossible to do.  Good boxers know how to stick to their plan after the first punch is landed in part because they constantly practice for it.  It’s the same with the practice of mindfulness through regular meditation.

Mindfulness Promotes Healthy Personal Finances

Greater mindfulness can provide more tranquility in the face of even extreme financial events.  For example, if you lost all your money, you would likely survive and find some way to rebuild your life.  And mindfulness would support your rebuilding and help you recognize some happiness in that new life.  In fact, “losing it all” is a favorite fiction device, which allows characters to explore new horizons and to become more fulfilled than they ever dreamed of in their earlier lives.  Like most clichés, this idea originates from some deeper truth.  Not caring about losing all your savings surely sounds crazy to some folks.  But if you think of the life of Buddhist monks who forgo most daily pleasures and live in poverty, you recognize there is likely some fundamental truth here.  I’m not advocating giving away all your money.  I’m asking you realize through the help of mindfulness that your mostly exaggerated fears and desires about an uncertain future probably drive your financial decisions more than they should.

So, what if more Americans opened up their eyes to their dismal financial situations and faced their fears about the future?  As an example, let’s look at the first three areas of financial awareness again (emergency fund, spending, and waste) and see what types of changes mindfulness might promote.

Emergency fund:  To build an emergency fund, you’ll probably have to give up or reduce spending on something.  There are loads of ideas out there on where to look for the savings to go into an emergency fund.  One example is to save some gas money by taking a carpool, bike, bus, or train to work a few days a week instead of driving your own car.  Mindfulness will help you appreciate the merits of that new life style.  Carpooling might yeild new relationships with and understanding of your car-mates.  Biking might improve your health.  Riding the bus might allow you more time to read or even meditate.

Spending: Mindfulness will help you be more aware of when you’re spending, what you’re buying, and why.  What if each time you bought something with cash, debit, credit, or check you first stopped and thought for 30 seconds about why you’re making that purchase?  Mindfulness practice can help you make that pause more often and more consistently.  Or imagine if you paused and thought for a while about the life circumstances that led to paying a late fee on a bill and how that could be avoided next time.  There’s a whole array of behaviors that can be curtailed by mindful reminders like this including: shopping for pleasure or to “treat yourself”, buying things that aren’t on a preset list, buying things because of a “sale”, or buying for convenience.

Waste: Mindfulness helps you step outside our culture of consumption.  Advertisers freely admit they constantly attempt to amplify certain emotions in us to trigger purchases.  Common ploys include eliciting greed, fear, altruism, envy, pride, and shame.  Mindfulness helps you become more aware of when this sensory overload may be stoking your emotions.  And have you ever actually taken an hour to study all your monthly bills and automated payments to see if your paying for something you don’t even want?  This often happens with things like internet apps and gym memberships that are used for a while and then forgotten, while the payments continue.  Similarly, bank account, insurance, credit card, cell phone, cable/internet, and even some utility bills can have hidden unnecessary fees or price increases that may have slipped past you.  And many people are eliminating the arguable waste of cable, or television entirely, and finding they enjoy the replacement activities more.

Without detailing the other personal finance areas, you can already see that if your spending and wasting less money, you’ll have greater ability to save, budget, and invest mindfully as well.  All of this will, in turn increase your net worth.  The Mindfully Investing website is devoted specifically to the area of investing.  So, you can read much more on the particular interplay of mindfulness and investing here and here, if you’d like.  Beyond investing, I can say I’ve personally experienced the benefits of mindfulness in all these financial areas on an almost daily basis.

Healthy Personal Finances Promote Mindfulness

Then there’s the second half of the virtuous cycle between mindfulness and personal finances.  After mindfulness starts improving your finances, you start to reap the rewards of those improved finances.  Beyond the obvious monetary rewards, stable and predictable finances fosters more meaningful rewards including:

  • Paying off debt will eliminate worries about wasting money every month just for the privilege of staying afloat.
  • Less debt, balanced income/spending, and more stable finances in general will decrease daily stress and worry about finances, which increases your overall mental health, which in turn, boosts your physical health.  This is the true meaning of “financial health.”
  • As you economize, you’ll almost certainly trade some unhealthy expensive habits (think cars, booze, and television) for some cheaper more healthy and fulfilling habits (think biking, water, and outdoor fun).
  • You’ll have fewer reasons to worry about the future in the first place.  For example, knowing you have an emergency fund will certainly reduce your worry about the impacts of unexpected emergencies.
  • You’ll spend less energy desiring things you don’t need or can’t afford.  With a spending plan and budget, you’ll have a clear idea of the trade offs involved with buying something new.  And you’ll have sorted out more realistic material goals from distracting fantasies.
  • You’ll more readily accept and be grateful for your current material situation, because you can compare it to your previous frustrating experience of accumulating junk at the expense of your greater well-being.
  • By saving and investing more consistently, you’ll eventually increase your net worth, which will allow more flexibility and a greater range of life choices.  You can start to contemplate things like: spending more time with family/friends, changing careers, starting a business, working part-time, devoting time to charity, an extended vacation, or perhaps even retiring early.
  • Having greater flexibility and life choices in turn allows more time for cultivating mindfulness, which will increase your capacity for compassion and help further improve your relationships.
  • And your greater peace of mind from all of this will allow you to apply mindfulness more deeply to your life, including exploring more fundamental questions about how you expend your financial resources.  This is where the virtuous cycle between mindfulness and personal finances really starts to ramp up.

Mindfulness is Not A Windfall

Mindfulness is not a panacea for all your financial woes.  It won’t magically put an extra $1000 in your pocket each month.  Certain events will set you back regardless of how mindful you are.  If you’re laid off for 6 months, you won’t have a fully stocked emergency fund, because that’s the whole purpose of an emergency fund.  But mindfulness will help you handle these sorts of set backs and make you more prepared for life’s financial uncertainties.

Further, I think it’s important to note that mindfulness can’t overcome the all the overwhelming effects of true poverty.  If you simply don’t have enough to eat and access to decent shelter, much of what I’ve discussed is essentially academic.  But most people reading this probably have adequate food and shelter, which means you have at least a few choices you can make about spending.  And the further you are from a true poverty level, the greater the likely rewards of riding the virtuous cycle of mindfulness and personal finances.

Mindfulness is not something you attain like flipping a light switch.  There’s a wide spectrum of presence in the now and non-judgmental mindfulness.  This ranges from people who occasionally meditate, to those who meditate regularly and practice toward being mindful in everyday life, to those who spend huge amounts of time meditating and are mindful of nearly every waking moment.  This far end of the spectrum includes people like Buddhist monks.  Obviously, that level of mindfulness is probably not realistic for most of us.

Fortunately, it’s not an all or nothing proposition.  As you progress along the continuum of mindfulness, you can make incremental improvements to your personal finances and reap incremental reductions in your financial worry and stress.  The idea is to address what you can, and work on mindful detachment about things you have no control over.

Further, the cultivation of mindfulness is not “easy”.  It requires regular practice and a recurring committment as part of a lifelong journey.  I think this is the part that is most disappointing to people with financial troubles.  It’s like saying: to lose weight, just continually train to run a marathon on a moment’s notice.  It can seem like the mindful cure is harder than living with the disease of financial blindness.  I think this narrow view misses two important things.

One, it may seem like it would be easier to simply try to manage your finances better without all this mindfulness stuff.  But that fails to address the underlying emotional issues that contributed to whatever financial problems you are trying to correct.  Everybody has different financial issues that have different root causes.  Why does he splurge spend?  Why is she afraid of making a budget?  Why does she spend money on things that don’t seem to make her any happier?  Mindfulness can help you identify and moderate the emotional causes of these behaviors, which assists you with minimizing splurging, starting a budget process, spending less on frivolous stuff, etc.

Two, a mindful approach to improved finances reduces frustration and relieves stress along the way.  Perhaps you need to postpone a much-anticipated vacation to get your spending more in balance with your income.  Most folks will view that as a huge bummer that could cast a gloomy shadow over an entire summer.  That view and mood means your less likely to stick to the no-vacation plan.  Mindfulness can help you reduce the impact of those emotions, highlight the value of what’s here at home, and plan for a financially prudent vacation in a couple of years.


Even incremental progress toward mindfulness will help you make incremental progress towards:

  • Recognizing harmful behaviors related to your personal finances
  • Correcting those behaviors to improve your spending and saving habits
  • Being more content with your material situation while making these improvements
  • Less catastrophizing about any “hardships” associated with improving your finances.

To the extent you’re able to make concrete changes to your finances, you’ll experience less stress from financial issues now and in the future.  And eventually, a long-term committment to healthier finances will expand your future financial and life options.

The virtuous cycle of mindfulness and personal finances can seem self-centered.  As a process, it’s all about inspecting your feelings, your thoughts and your actions and then improving your personal behaviors related to finance to put more money in your pocket.  But this ignores the result of the process.  If you stop at the point where you’ve only helped yourself, you’re missing at least half the benefit of mindfulness.  In my view, mindfulness is like the safety instructions on an airplane.  You must secure your own oxygen mask before trying to help others.  You’re never going to help anyone if your passed out from  financial hypoxia.  Conversely, if you have healthy finances, you can devote more mental energy to compassion, understanding, and assisting your fellow human beings.  And once the virtuous cycle starts to ramp up, mindful contemplation of your new flexibility and greater range of life choices will naturally lead you to choices that help others.  I’m not going to try to justify that last statement, because much is already written about how mindfulness leads to compassion and helping.  In my experience, once you become more mindful, helping others becomes the obvious thing to do.

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