by Want to learn how to stop spending money on things you don’t really need? Things that end up in the trash or in the donation pile a few months later? Wouldn’t you rather want to see your money grow through savings and investing? Continue reading to find out the 9 ways to stop spending money!
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Create a Budget
One of the best ways to reduce your wasteful spending is to create a budget.
“You can’t manage what you don’t know.” -popular business mantra
A budget is a predetermined allocation of your spending. You might, for example, include in your budget $50 a month on clothes.
There’s nothing that says you NEED to spend $50 a month. If there’s nothing that you want to buy on a particular month, you can roll over your savings to the following month.
If you want to buy shoes that cost $100, you might wait 2 months to purchase the shoes, or just purchase the shoes now and not spend money for the next 2 months. Either way, you’re making a guilt-free purchase that is limited to your budget.
Without a budget, you could very easily spend $150 on shoes, $100 on a jacket, and $75 on pants. All in the same month. Who’s going to stop you?
The one thing that can stop you is your budget. Your budget will help guide you to make better choices.
Although it’s important to not overextend your budget, for example, budgeting $1000 on clothes per month, it’s equally important to not set too restrictive of a budget, i.e. $5 on clothes per month.
Psychology is a funny thing. When it comes to diets, you might tell yourself you’ll never eat sugar ever again. But after a few weeks, what happens? You crave sugar more than ever, and go on the biggest sugar bender consisting of Kit Kats, Snickers, and Haagen-Daz. If you quit sugar a few weeks, go on a bender, quit again, and repeat the cycle, you never accomplish your goals. Yo-yo dieting doesn’t work.
Similarly, yo-yo budgeting doesn’t work. If you say you’re not gonna spend money for clothes for the next 6 months, you might end up just spending hundreds or thousands at the end of it all.
Be sure to set a reasonable amount in your budget for yourself. Set a budget for clothes, food, entertainment, and fun.
Whether it be games, books, travel, or gifts, it certainly is important to set aside money for fun. You only get one life. Be sure to live it!
Kondo – Does it Bring you joy?
If you’ve ever followed the world famous Marie Kondo, you would know that her mantra to decluttering follows one simple rule. If the item sparks joy, you should consider keeping it. If the item does not spark joy, you should consider donating it or throwing it away.
The principle works mainly for non-essentials. You don’t need to hold your bag of carrots or apples at the grocery store and ask yourself if it sparks joy. Food is essential, and particularly low-cost, high nutrition foods should be a no-brainer.
Non-essential items may include games, clothes, decorations, electronics, toys, etc.
You might have your eye on the latest gadget. Before purchasing, just ask yourself: Will it enhance your life and bring you joy? Will it bring you a level of utility that is unmatched by your other electronics? Or will it end up in the junk pile in a few months? Thinking about the answer should get you closer to making your decision.
Favor experiences over things
Psychology research has shown that experiences bring people more happiness than do possessions.
Experiences tend to make people happier because they are less likely to measure the value of their experiences by comparing them to those of others.
Experiential purchases are also more associated with identity, connection, and social behavior.
Source: The Atlantic
When I think back on some of my clothes purchases… (white jeans.. really!?), I think about some stupid mistakes that I made. But when l look back at some of my experiences, for example overseas travel, I look back with fondness and not a drop of regret.
Be like the Cat
When I buy something from Amazon, sometimes it comes in a pretty sizeable cardboard box. My cat cares nothing about what’s inside the box. When the box is empty, she loves to just sit in it and enjoy her cozy little enclave. She doesn’t care for the material possessions. She never owns the box. But she values the experience of being in the moment, and being in the box.
Be like the cat.
Make Money Hard to Access / Auto Invest
Once you’ve established a spending budget, hopefully you can invest a large portion of the remainder of your income.
By auto investing your income, the money sits in a brokerage account and grows over time. It becomes hard to access because you’ll have to sell the securities (stocks, bonds, etc.) and transfer it over to your checking account before you can spend it. That’s just too much work!
This excess work provides an additional barrier to spending freely.
Sure I can purchase a new car if I really wanted to. But I’d also have to go through all of the steps in my brokerage to make use of the money. I’m lazy. The barrier to entry is too high.
Since I don’t purchase the car, the money continues to grow.
Revisit – Think it through
Put the item on mental layaway.
Let’s say you really wanted this cool new massage chair.
Your impulse tells you to purchase it today. Resist that impulse!
Do you really want or need the massage chair. Will it spark joy?
Put it on mental layaway, and revisit it in a week. You’d be surprised at how often you’ll forget about the item, or just plain realize that you don’t think it’s worth the money.
Compare the item to the cost of your time
Nothing is free in this life. Not your money, not your time, not your energy.
The next time you want to purchase something, think not just about the amount of money it costs, but also the amount of time it will take to work for that money.
For example, let’s say you want to purchase an iPad that you don’t really need, but think will be fun to have. This particular iPad costs $400. Sure you might have $400 sitting in your bank account waiting to be spent. But how long did it take you to earn that $400? If you make $20 an hour, essentially the iPad would cost you 20 hours of your time. Is it worth it?
Just doing this simple exercise relating price to your time can help you think about purchasing something in a different lens. It will force you to think twice about making some unnecessary purchases.
Get a Second Opinion
I can’t tell you how many times I bought clothes that barely ever saw the light of day outside of my closet.
Let’s say you want to purchase a new trendy suit. You think it looks great and it is sure to impress the world and give you the self-confidence you need.
Before purchasing the suit, try asking for a second opinion! Ask your friend, sibling, or significant other what their impression of the suit is. Do they like it?
What if they told you that it’s ugly? That the suit is part of a trend that will be dead in a month? That the suit does not fit you well?
That would definitely save you the embarrassment of buying a suit that is not right for you, AND it will save you money.
If you bought it, and wore it only once before the trend died, you would have wasted the money!
If deep down you still believed the suit was right for you, you can still buy it. But at least with a second opinion, you can make a better judgement call and in some cases, save money.
Make a note of what you own
Know what NOT to buy.
Have you ever gone to the grocery store to buy some avocados, only to come home to find several avocados already sitting in your fridge or on the counter? And when you can’t eat all the avocados in time, they start to turn brown and expire. I hate when that happens!
Take note of what you already own before you go shopping. Before grocery shopping, open your fridge and check your counter to see what you have. That way you won’t buy an excess items, and end up wasting it as it goes bad.
Take note of what’s in your closet too before buying new clothes. I remember buying a black dress shirt on sale, thinking I could make good use out of it. Little did I know that when I returned home, I found a perfectly good and unworn black already sitting in my closet!
Make a Shopping List
Know what you need to buy in advance.
Make a Shopping List before you head out to the store!
After you’ve made a note of what you own and don’t need to buy, it’s time to figure out what you actually DO need to buy.
Many retail stores use different strategies to get you to spend more. One strategy includes optimizing its retail layout / product placement. For example, some retailers put their most profitable items at eye-level, which tends to sell more. Some retailers know that people come in just to buy milk, so they put the milk all the way towards the back of the store so you’ll have a greater opportunity to run into something that will catch your eye and purchase. Source: DotActiv
If you want to save money, make sure you don’t fall for this strategy.
Often times before I go to Target, I make a shopping list of the items I need to purchase. This keeps me on track and on Target (pun intended). I can quickly buy what I need and head out the door. If something catches my eye, but is not on my shopping list, I probably won’t buy it.
It’s so easy to create a shopping list and have it on your phone ready to go. The one I use is Google Shopping List.
When people shop without a shopping list, they tend to walk aimlessly down the aisles, making unnecessary and often regrettable purchases.
Putting it All Together
We can’t exactly stop spending money altogether, but we can definitely stop spending money on regrettable purchases!
These 9 techniques will help you think twice before purchasing unnecessary and often unneeded items.
- Create a Budget
- Follow the Kondo philosophy and ask yourself: Does the item bring you joy?
- Favor experiences over things
- Make your money Harder to Access and Auto Invest it
- Wait a week or longer to purchase the item
- Compare the cost of the item to the value of your time
- Get a second opinion
- Take inventory of what you own – Know what NOT to buy
- Make a shopping list – Know what TO buy
Let me know your thoughts below!
What are the best techniques that keep you from spending your money unwisely?
