Savings advice is rife with trite admonishments that just don't get to the root of the problem of spending too much and saving too little. What if the latest diet book advised readers to "just eat less," or a book about how to become a millionaire said only "just earn more"? The problem is how to actually get there, and in many cases this means using a psychological approach to tackle your financial problems. Here we take a look at some unusual tactics to help you save more.
TUTORIAL: The Basics Of Balancing Your Personal Budget
1. Think Gray
According to a study at Stanford University, when young people are shown an image of how they will look in 40-plus years, most reported that they would save twice as much as those who didn't see the image. The increasing length of the average lifespan (not to mention the questions surrounding the future of Social Security) make saving for a retirement a key part of financial planning. But, in order to set and meet long-term financial goals, young savers need to be able to envision the future - and themselves in it. Take a look at your senior family members and try to envision what you will look like when you are in your 60s, 70s and 80s. It might just help give you the push you need to get that retirement savings plan off the ground. After all, if you have to imagine yourself with gray hair, wrinkles and a crooked back, wouldn't it be nice to picture yourself on a beach somewhere, rather than struggling to get by in some drafty apartment? (For more insight, see Delay In Retirement Savings Costs More In The Long Run.)
2. Take Your Time to Pay Down Debt
If you've racked up your credit card to the point that things have gotten out of hand, loan consolidation can be a great way to pay it down at a better interest rate. However, it might not be the best way to prevent it from happening again. After all, if you remove your debt from your credit card, you open up the possibility that you will just fill it back up again. Plus, if you racked up your credit card debt knowing the high interest rate it carries, maybe paying that rate is just the slap on the wrist you need to keep you from pulling it out quite so often. (For more insight on this topic, see Is it wise to consolidate credit card debt?)
3. Beat Yourself Up a Bit
One financial trap people often fall into is confirmation bias. When you want to believe in the strategy you are using to save or invest, it can be hard to accept that it isn't working. Accepting failure is painful, but if you want to really be successful with your money, you need to be able to look your worst mistakes right in the eye and decide not to make them again ... and again, and again.
4. Reward Yourself
Many people will shy away from making a big purchase but will have no trouble spending $5 here and $10 there. You might be able to rationalize this because these things are "cheap," but this also means that they are often chosen carelessly - and perhaps too often. At this point, everyone has been well versed on the deleterious effects of the "latte factor," so we'll spare you the lecture here. The point is, if you choose where you spend your disposable income carefully, chances are it will end up going to a few larger purchases, rather than many small ones. And, because you will be choosing your expenditures carefully, chances are you will either be spending less or deriving more satisfaction from what your money can buy. (Learn more tips for cutting your expenses in Save Without Sacrifice.)
5. Avoid Following Financial Advice
If you think you should be reading this article, taking notes and applying it to your life, then you're on the right track. Getting informed about ways to improve your finances is essential to actually doing it - but so is using common sense. If you're going to make a change, spend some time thinking about whether it'll actually work for you. If you've come up with your own strategies that make sense and are working for you, run with them. The point isn't to have a model set of finances, but to develop a system that will help you save more, avoid debt and work toward a comfortable financial future. How you get there is up to you.
The Bottom Line
Sometimes, changing financial habits takes a little creativity. If you're looking to improve your financial life, be open to experimentation and finding the tactics that work for you. After all, saving money is simple, but that doesn't make it easy.