How we spend determines how much we can save and invest. It all starts with establishing a few rules. Here are mine.
Major purchases are never made on impulse
I never buy anything over $1,000 without thorough research. Whether it concerns a car, a holiday, a large household appliance or a new investment product. If it’s four figures or more, there will be a lot of research and comparisons made before I hit the buy button.
For anything over $100, a different rule applies. I wait 24 hours before I buy anything. This avoids impulse spending on smaller, but still important, purchases. This mindset becomes second nature over time. One day you’ll find yourself using it for many smaller purchases too.
Major expenses are kept to a minimum
The common advice to stop buying coffee shop lattes when you need to save money is problematic for a simple reason. Coffee doesn’t cost that much, not compared to major expenses like housing or childcare. If you can find ways to organize your life so that you can cut your housing or childcare costs in half, you will save significantly more than if you cut your coffee costs in half.
All my life I have kept housing costs at less than 20% of my income, often much less. The strategies for this are varied. I have lived with family, roommates and strangers. I have worked in exchange for housing while living abroad. I have lived non-conventional homes. I lived in Spain (where housing costs at the time were a fraction of those in my home country).
Are all of these strategies practical for most people? Not really. But it’s worth thinking about what might work for you, even if it’s something drastic like moving. Starting with your biggest expense, which for most of us is housing, and deliberately looking for ways to reduce it to as little as possible can make a huge difference over time.
I don’t buy things I don’t need
This seems obvious, but most of us aren’t even close to following this rule. Look at your last ten purchases. How many were there real needs? When it comes to basic things like clothes, I don’t buy anything until I’ve looked in my closet to see if I have something similar. I almost always do that.
My biggest tip here is to do some serious decluttering and actually organize your belongings. It may seem counterintuitive, but when you have less, you are more aware of what you actually own. You don’t end up buying another version of something that you already have in a cupboard, kitchen cupboard or junk drawer.
I think of expenses in terms of life energy
This is a concept covered in the book Your money or your life by Joseph R. Dominguez and Vicki Robin. The authors urge readers to view money itself as life energy, as most of us trade precious energy reserves – and hours of time – for the dollars in our paychecks.
How much time and energy does it cost you to earn €500? Thinking this way puts major purchases in a whole new light. Is that new item really worth 10 hours of your time and energy? Or 20, or 100?
This actually works both ways. Some things ‘take’ several hours and only give you one hour of low-value pleasure. They’re probably not worth it. Some things only ‘cost’ an hour of your life, but bring you a lot of pleasure, sometimes for years. They are the real purchases with a high value.
I design my environment
My environment is not set up for spending. I do not save payment details for the next time I check out online. I unsubscribe from marketing emails. I don’t scroll endlessly on social sites that always try to sell you something, directly or indirectly. I enjoy most of my free time in non-shopping environments (on a mountain or on a secluded beach if I can).
Your environment has a major influence on your behavior. Make sure it doesn’t scream at you to make unnecessary expenses.
I focus on creating much more than consuming
I’m a professional writer, a (very) amateur photographer and a creative in general. I would make something and then buy something. My daily activities are much more focused on creating than consuming.
We have become a society where consumption is – for many of us – built into our daily lives in multiple ways. That’s not creating. We have to look it up. But when we do, we tend to save money and feel more fulfilled. Creative hobbies are worth cultivating.
These rules help me because they are specific and strategic. If you’ve given yourself a vague rule like “spend less money,” it’s difficult to implement because there’s no real strategy. Consider these instead.
About the author
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks, and the occasional award-winning short story. Her work has appeared in a range of publications, both online and offline, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn more about Karen
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