Spending Problem? Try This!

Recently, I was taking in some content by an expert in psychology and money, Brad Klontz.  He studies how people make money decisions and the emotional barriers that exist to making good decisions.

One of his tips to help people spend less money was to put a note in your cell phone that would have the following questions:

  1. Do I really need this?

  2. Do I have room for this?

  3. What if I wait to buy this?

  4. How will I feel tomorrow if I buy this?

He suggested every time you are about to make a purchase you take your phone out, look at and answer each question before you buy the item.  If you still think you need/want to buy it, then buy it tomorrow instead of today.

We all know people who have major difficulties spending too much.  This might even be you! As I discuss money with people one of the most common things people say to me is how they struggle with shopping and/or over spending.

Trying to use willpower sometimes isn’t enough.  Our emotions get in the way.

Having spending rules and systems can keep these emotions in check.

This is why I have been a long advocate for the 24-hour rule for large purchases.  If it is a good buy, it will be a good buy tomorrow. If it is not a good buy, you give your rational part of the brain time to think instead of just letting your emotional part of the brain be in complete control in the moment.

This additional action of answering these questions forces your rational brain to get involved in the decision.  It might be just what you need to avoid making a spending mistake you will regret.

Our emotions get involved in our financial decisions all of the time.  In many ways we are hardwired to do things wrong. Having rules or a systematic way of making choices can help improve our chances of keeping us on the financial track we want to be on.

We Make More Money Than Before. Where Did It All Go?

One of the biggest financial myths...

“When we make more money, it will be easier to save.”  

“I will save more when I get a raise!”

“Life will be so much easier when I make _____ amount of money.”

Have you heard these?  Have you said them yourself?

It is common for people to make higher incomes as they get older.  It is less common that those same people will save more.  More likely is people after 5-10 years later ask themselves the title of this post… "Where did it all go?"

Lifestyle Creep

A common problem for Americans is lifestyle creep.  As a worker advances her career, she might think that her financial picture would improve.  This is often NOT the case!  As income increases over the years, expenses likely go up as well.  

People soon find out that they also have more burdens as time goes on.  They buy a home.  They get married. They have kids (which I’ve heard can be expensive).  Health insurance premiums rise.  A new car is needed. They move to a bigger home.  More and more obligations arise.  

They were living paycheck-to-paycheck before, and they live paycheck to paycheck today.  

Does this sound familiar to you?

Waiting until you can afford to save is a loser’s game!

Rules Rule!  

One way to combat this all too common problem is to SYSTEMATICALLY allocate your saving/spending budget when income goes up.  By having a rule beforehand that you are committed to following will help you defend against lifestyle creep while at the same time give you permission to increase spending over time.  

An example: Have a rule that every time you get a raise at work, half goes to financial goals and the other half goes for increasing your lifestyle.  

If you get a 4% raise at work, you will take 2% and increase your 401k contribution, debt repayment plan, or whatever your financial goals are.  The other 2% you are free to add to your expenses.  You might say, “But I need all 4% for my obligations to my family!”  And that is the point.  You will always have new obligations that are important and you will likely never get around to saving more.

Put your financial goals ahead of your current comfort. Trust that eventually, you will get to the point where your consumer debt is gone and your retirement savings are on track.  Then, you will feel comfortable with your decision.  

Contrast this to the family who NEVER gets to the point where they are on track and as a result always has financial stress and anxiety.  

The SYSTEM  will save you!

One Trick to Keep Your Spending Under Control

Many families find it difficult to keep their spending under control.  Have you ever asked yourself, “Where did our money go?  We are making more than before, but things seem as stretched as they have ever been!”  This is a common problem.  People make higher income over time but don’t know where it all goes.


The step that can change your finances forever!


So what is the trick?  Get it out of your hands before you have a chance to spend it!  Most people get their paychecks automatically deposited into their checking account.  Now… go a step further!  Get on your bank’s online account access and take a percentage (I encourage 10%) and have it automatically transferred out of your checking account the following day after you get paid.

Many live paycheck-to-paycheck.  If you take 10% and get it out of your account, and live paycheck-to-paycheck with the rest you have just made your financial future better!  Where should you send this money?  It depends on what your biggest goal is.  If emergency savings is your main problem, put it into a savings account.  If you are behind on your retirement savings, send it into your Roth IRA.

Most people inherently understand that living below your paycheck and keeping debts low is the key to long-term success.  This is the step that makes it happen!  Don’t let another day go by before you make this change!  This is THE KEY!  Most of us will find a good reason to spend the money if you have access.  So, get rid of it!  Make it move in the right direction.

“But I can’t cut 10% out of my spending!” you might say.  

Have you tried?  How did you make it when your income was 10% less?  You will most likely find a way.  

What if you would have done this 10 years ago?

How different would your financial picture be if you had started this years ago?  How much happiness came from that extra 10% of spending?  Compare that to how much happiness would have come from saving it!  

Are you are stressed about your debts, lack of retirement funding, lack of emergency saving?  I would bet that saving that last 10% would have been of more value to you than the value you received by spending it.  

What about the next 10 years?

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