Once upon a time, Nicolas Cage bought a pet octopus that he claimed helped him become a better actor. Frankly, he could be right.
But that kind of attitude also led to his eventual bankruptcy.
I'm sure the guy had a great time with his king cobras, European castles, 50 cars, and private island. But in the end, he was forced to take a bunch of terrible movie roles to dig himself out of his financial hole. Nobody wants that.
Ok, I get it. You make much better decisions than Nic Cage. We all do. But there's still an important lesson here.
A lot of people have bad spending habits, and I would argue that we are getting worse and worse. Consumerism is hitting new highs with the rise of trend-setting influencers, FOMO, and social media; and undisciplined spending is rising along with it.
That is why it's more important than ever to be thoughtful about how you spend your money. Start this year by holding yourself accountable. Getting your finances in order is tough! But if you can follow some basic rules, you can make it dramatically easier.
Foolproof ways to avoid overspending
Use a separate email account for online shopping.
Sure, you could unsubscribe from the daily deal emails, but why give yourself the chance to read them? If you have a separate email account you won’t be tempted to browse the latest sales, but at the same time, you’ll have access to coupons and sales when you might actually need them.
Create your own framework.
Ask yourself a set of questions to frame the purchase in your head. This will put it into perspective and help you realize you might not need it, or can delay the purchase until later.
Sample questions to ask yourself:
- Is this something I need? Or want?
- Why do I need this right now?
- Can I live without it for a month?
- Will this still make me happy in a few weeks?
- Is this a good deal?
Maybe even take it a step further, and set up a notification on your phone to remind yourself of your framework. Whatever works best for you.
Remind yourself of how much you're spending more often.
A lot of people have a tracker app like Mint or Personal Capital (which are great tools, don’t get me wrong). The problem is that most people check in at the end of the month and say "Ahh dang, I overspent this month. I'll do better next time."
It's too hard to keep a mental goal for a full month.
Imagine you are trying to run a race in your fastest time ever, but you only time yourself once a month. You might still run fast, but if you time yourself every week (or day) you can make the necessary training adjustments to reach your goal.
Take a look at your progress every week or so. I promise you will start to see your spending in a new way.
Do your research.
Anytime I make a big or unusual purchase, I spend days, or even weeks, searching for a great deal. I'm amazed when I see people make a purchase in-store without even checking online first; in-store is often the most expensive way to buy something!
Look for coupons. Search the depths of the internet. Find online promo codes. Ask your friends for employee discounts or referral codes.
I am positive that you can use your resources to find a great deal.
Side benefit: You might also find something else you like better while doing your research. A more informed purchase is a better purchase.
Use your credit card portal to juice your points and earn a discount.
Many rewards cards have online shopping portals that give you extra points just for clicking through their website. If you use your credit cards efficiently (and responsibly...), you can get a meaningful discount on every purchase you make.
For example, let's say I want to buy some new pants from Bloomingdale's. By going to the Chase shopping portal first, I can get an additional 5x points on my purchase, effectively earning myself a 6% coupon!
This goes without saying, but don't do this if you are bad with credit cards. It is never worth it if you can't trust yourself with the plastic.
Prioritize your purchases and learn to do more with less.
Life would be really boring if you never bought the things you want! There's nothing wrong with that. But try to take an extra minute to think about how you are spending your dollars.
Does that new coat make you happier, or do you want to show it off? When you spend your money on things that truly make you happier, you will appreciate the things you own a lot more.
Once you get into the groove, it feels great to watch your bank account grow. You will feel liberated and in control of your financial life.
Let's do an experiment
Dedicate ONE month to spending extremely frugally. Set a target amount of savings you want to achieve, and figure out how to make it happen. And hold yourself to it.
Figure out how much money you want to save in one month.
i.e. Let's say it's $500.
Take a detailed look at your variable expenses. Where are you spending too much?
i.e. I'm spending too much on eating at restaurants, gourmet coffee, and impulse purchases on Amazon.
Make cuts as needed to hit your target for the month.
i.e. Don't eat out at all this month. Drink the coffee in your office (or maybe switch to tea if you have a Flavia machine, like in my office). Ban yourself from visiting Amazon, except for items you truly need.
Download a tracker/budget app, and check your spending at least once a week.
i.e. Mint and Personal Capital are both great choices.
Live your normal life, but put a little more thought into how you are spending your money.
i.e. Take that extra minute to think about each purchase you make. Follow your framework and ask yourself if it's something that will make you happier.
At the end of this month, take a few minutes to think about your experience.
- How much did you actually suffer or sacrifice this month?
- Did you hit your savings goal?
- How does it feel to see your bank account grow?
- Did you notice a shift in your mindset over the course of the month?
You can do this for one month. I promise. Elan Musk lived on $1 a day (for food) before he became a billionaire. I wouldn't recommend doing that (for nutrition reasons, if nothing else!), but he came out just fine. And it helped him realize that he wouldn't starve, even if his business ideas tanked.
What are your strategies?
Nic Cage decided to file for bankruptcy and start taking every movie role that came his way. Don't let that happen to you.
What have you found to be most effective in your life? Do you struggle with impulse purchases? Have you used any of these strategies successfully or unsuccessfully?