5 Ways To Train Your Brain To Save, Not Splurge5 min. read
Regularly saving some of our income every month is the most basic way to ensure that we have something set aside for a rainy day. However, it can be difficult to remember the rainy days are coming when it’s a warm, sunny day and there’s a sale on cute bags or Apple just released a new iPhone.
Regularly saving is a good financial habit to have, but it’s often a case of the spirit is willing but the mind is kind of weak. Well, in this post, we’re going to help you make sure that saving money is a case of mind over matter.
Check out these five tricks to help you develop a money-saving mindset.
1. Find creative “excuses” to really save
We recommend that you try to develop two spending habits that will also increase your saving habits. First, when you splurge—save and, when you save, put it away.
The first idea might seem counterproductive; after all, splurging is supposed to be a bad money habit. Money spent splurging is money wasted, right? Maybe, but try doing this: When you splurge and buy something, save the same amount of money.
So, when you buy the latest iPhone, make sure the next day you put the equivalent of the iPhone’s cost in your savings account. That way you can still indulge your present wants while putting something aside for your future needs.
You can also transform thrifty living into savings. The idea is, when you save some money, you deposit that money.
Think about it, when you save money by not spending it, it’s not really “saved.” You’ve just kind of delayed spending it.
Take for example, bringing baon so you don’t buy fast-food during lunch–you end the day with an extra P140 in your wallet. Nice, but it could be nicer. If you take that saved money and put it in your bank account, your thrifty habits will actually have grown your savings.
2. Cover up your credit card with an image of your financial goals
Sometimes the best way to curb a spur of the moment purchase is to remind yourself about your long-term goals.
Goal setting is a good way to keep yourself in a saving mindset. Think about how much you want to have saved by a certain time period or, how much you need to make a big-purchase investment like a car or your dream home.
Once you decide on your long-term financial goal, write it down on a piece of paper or take a picture of it. Wrap this around your credit card and tape it in place. Now, every time you pull out your credit card, you will be reminded about the good reason you to save and NOT purchase that expensive coffee.
3. Visualize the value of the item
Of course, you know that buying something will cost you something, but sometimes it’s a little hard to see the concrete cost of a purchase. One way to really understand an item’s cost is to think about how many hours you need to work to pay for it.
Get your monthly earnings—minus any deductibles—then calculate how much you get paid an hour. Then, compare the cost of the item you want to buy to your hourly wage. You now know how many hours of your life it took to buy that item.
So, to eat at that fancy restaurant, how many hours did you have to work? Was an hour worth of pleasure worth the hours you spent slogging in the office?
4. Curb impulse buying with the 30-Day Rule
The 30-Day Rule states that, before you buy something, you wait 30 days. The idea is, by waiting 30 days, you can think about whether a purchase is really worth it.
Like most effective mind-setting systems, there are a series of steps to following the thirty-day rule. The first is to make a “wish list.”
Whenever you see something you want, place it on your wish. Make sure you also list the item’s cost and the day that you decided you wanted it.
Check your list every now and then and, when an item or several items on the list hit the 30-day mark, ask yourself if you still really want it AND if you can afford it. If the answer to both these questions is “yes,” buy the item and scratch it off your list.
After scratching an item off your list, reset the list. Look at the remaining items and, if you still want them, place them on the list again. Change the dates to the date of the new list. Wait another 30 days and repeat the process.
The great thing about the 30-day rule is it curbs impulse buying and it also gives you something to look forward to. After 30 days, you can reward yourself for restraint. You work hard to earn and save money, there’s nothing wrong with a little splurge every now and then.
5. Keep a Zero-Sum Budget
This budget ensures that you only spend on what you need, the rest of it goes towards your savings.
To start keeping a zero-sum budget, a little before the start of every month, get out a pen and paper and determine two things: Your income for the next month and your expenses for the next month. The expenses listed here should just be the essentials—food, bills payment, etc.
Subtract your expenses from your projected income. What will be left is your excess cash flow. Now, make a list of what you will spend this on. You can now think of a few non-essentials or splurges—such as a family birthday celebration—then minus the cost of this from your excess cash flow. Whatever is left, and there SHOULD be something set aside for your savings.
When you get your month’s pay, separate the amounts: your projected expenses and the amount you’re going to save. Immediately transfer the amount you’re going to save into your bank account.
If you can, put your savings in a passbook account or time deposit—not your ATM. It should be difficult to get and safely out of sight and hopefully out of mind.