Cash News
When it comes to saving money, getting your brain on board can sometimes be half the battle. Fighting the urge to spend money and staying disciplined enough to save regularly isn’t easy; just about everyone has made financial decisions against their better judgment.
By adopting more positive spending habits, you may find it easier to cut down on impulse buys, supercharge your savings, and get closer to reaching your financial goals. Here are a few tips to change the way you think about spending and saving for the better:
Many browsers, apps, and websites allow you to save your credit or debit card information to make checking out faster and more convenient in the future. However, doing so can encourage you to make purchases at the click of a button before really thinking about whether you can really afford or even need the item.
It might not seem like it, but those few extra moments it takes to find your wallet and enter your card information could be enough to cause you to slow down and rethink the purchase.
Plus, storing your payment information online can make you more susceptible to fraud and identity theft if there’s a data breach.
So, the next time you’re prompted to save your payment information, hit decline. You might find that your impulse spending drops dramatically — and you’ll be protecting your sensitive data.
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Studies have shown that people experience less emotional discomfort when paying with credit cards than with cash, which can lead to overspending. For example, a widely cited found that consumers are willing to pay more for the same items when using credit cards instead of cash.
Why? Essentially, the “pain of paying” is dulled by using credit since the payment doesn’t feel immediate and tangible.
One solution to curb overspending is to pay with cash. This may not be a viable option 100% of the time since not all retailers accept cash. But paying for purchases with cash whenever possible may help you cut back by helping you visualize that money leaving your wallet.
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When you spend money on something you want, the dollar amount may be easy to justify in your mind. However, if you think about your purchases in terms of the number of hours you would need to work to earn that amount, you may have second thoughts.
For example, say you earn $15 an hour. You’re planning to buy a new pair of shoes that cost $150, which may seem like a reasonable price tag. However, if you break it down by hours, you realize those shoes are equal to 10 hours of work, before taxes. If you already have a closet full of perfectly good shoes, that purchase might not seem worth more than a full day’s work to purchase.
Automating your savings means designating a portion of your income to be regularly transferred to a savings account or investment account without any manual effort on your part. For example, you could have your employer direct a percentage of your paycheck to your retirement account. Or you could set up a monthly transfer from your checking account to your savings account.
Automating savings contributions addresses the “present bias.” That’s the tendency to prioritize immediate rewards over future gains, even if the future benefits are greater — like spending money now, instead of setting funds aside for a rainy day fund or retirement.
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Giving yourself a cooling-off period when you’re tempted to make a non-essential purchase can help you rethink that spending.
For example, the 30-day savings rule is a strategy to help control impulse spending and encourage mindful saving. When you feel the urge to buy something non-essential, wait for 30 days instead of purchasing it right away. During this time, you can determine how the purchase would impact your budget, look for discounts or deals elsewhere, or even decide that you don’t really need the item after all.
This may not be necessary for every expense, but it can certainly help you save on bigger purchases. Consider setting a hard limit on the cost of purchases – say $50 – and make it mandatory to hold off on any purchase above that amount for 30 days.
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