4 Easy Tricks to Saving More and Spending Less
Despite everyone’s best intentions, sometimes you undermine your own efforts to save your money. Whether it’s the new TV, a designer handbag, or just splurging on fast food when you’ve got a fully stocked freezer, your money-centric brain and your wallet aren’t always aligned.
A new report our of Duke University’s Common Cents research lab has recently found ways to identify and counteract those “spending impulses” so that you can better improve your financial health. Although Common Cents generally works with financial service firms to create tools for low- and moderate-income families, their findings can be used by anyone, regardless of age or income.
1. Use Your Personal Milestones As Motivation
If you have a significant birthday coming up – whether it’s 25, 40, or 65, you can use this date as a catalyst to taking on financial tasks and responsibilities that you have been putting off. These milestone markers are a great time to review your retirement plan or options, update (or create) a will, or purchasing life insurance or long-term care insurance.
In the months, weeks, and even days approaching your milestone, make a physical list of the financial tasks that you want to complete. This behavior is referred to as “pre-commitment.”
“People are much more likely to make decisions and plans for their future selves,” says Next Avenue co-founder Kristen Berman. “Your future self almost seems like another person, one who is removed from today’s temptations and will make perfect life choices.”
2. Commit To Saving Your Taxes
According to a survey by GoBankingRates, older taxpayers are more likely to say they plan to save their tax refund, whereas younger people, especially lower-income households, often will spend it, frivolously or otherwise. But how can you ensure that you’ll actually save your refund?
Just as in the first commitment involving milestones, make a written commitment to yourself to save your refund. Pledge to do this before you get your check, and it increases the chances that you’ll actually follow through.
As an extra resource, when you file your taxes, you can direct the IRS to send your refund up among three accounts, divided in any way of your choosing. Using this feature, direct a certain amount to go directly into your savings, remaining untouched. The rest can go into your checking account and can be used to pay down debt, treat yourself to a nice outing, or whatever else you please. By putting a portion of your refund directly into savings, it becomes “out of sight, out of mind,” and you are less likely to spend it.
3. Get Rid of Your ‘Spending Regrets’
One of the most common “wasteful” items that consumers often find themselves regretting after a splurge? Eating out.
After analyzing more than 30,000 transactions on financial management app Qapital, Common Cents found that users were 70% more likely to regret spending on their food, restaurant, coffee shop, and other fast-food joint purchases than any other purchases they make.
So how can you cut back? There are those who suggest budgeting a specific amount per week or per month to use on frivolous food purchases, but the research doesn’t necessarily support this working for everyone. Instead, a better strategy is to limit the number of times you eat out, with the “winning” strategy being twice a week. Consumers rated their success at 24% better at saving when they made a plan ahead of time, and stuck to it. This also drastically reduces buyer’s remorse.
4. Think Bigger Numbers!
When you’re thinking of monthly bills and spending, are you thinking of whole, round numbers? Even though your car payment may be $307.64 a month, it’s likely you just round that up to $308, or even more so, $310. Believe it or not, this is actually a healthy way of looking at your numbers, and rounding off to these psychologically pleasing numbers can actually help you pay off debt faster, or increase your savings.
Because you’re already thinking about numbers at higher amounts, you can take the small differences, and actually use it to pay off loans or shift that money into a savings account. Even when it just seems like pennies, everything adds up over time. There are also multiple free apps for your mobile device that automatically set aside your extra pennies and either saves or invests them for you, helping to build your resources or grow them.
No matter what your currently financial situation, there are always options to help relieve debt and grow your bankroll without stress.