Given that two-thirds of the U.S. GDP relies on consumer spending, most Americans find it challenging to stop spending money. Even if your parents were thrifty while you were growing up, because of the media and society’s expectations, you likely developed a belief that you need stuff. Buy this toy and you’ll experience extreme fun! Use this hair product and you’ll land a boyfriend! If you drive this fancy car, people will respect you! Beer makes you attractive! Spend, spend, spend, and then spend some more!
It requires discipline and a strong sense of self to fight the urge to buy things that will give you that instant gratification. After all, “new” is often exciting – like a relationship during the honeymoon period. Nevertheless, becoming thrifty and saving money can be accomplished. Ultimately, it comes down to valuing financial security and peace of mind over material possessions.
1. Calculate How Much Hourly Work Something Costs
One of my favorite ways to determine whether something is worth buying or not is to mentally calculate how many hours of work something is going to cost me. If you make $20 per hour after taxes and you are debating buying something that’s priced at $100, it would take you 5 hours of time at work to pay off the purchase. When you start calculating expenses in these terms, the cost of buying something becomes more personal.
2. Wait 30-Days Before A Major Purchase
One of the biggest issues most Americans consumers experience is impulsive buying. As a materialistic society driven by consumerism, you are trained to want things, and unfortunately, there are just a ton of awesome products or services out there. But unless you are rich, you can’t possibly have them all, especially at once.
So when you find yourself interested in a purchase that is not strictly categorized as a need, wait 30-days. Use this time to reflect and reconsider your desire to make this purchase. You may experience a financial emergency in the meantime that will put the purchase in perspective by reminding you that, had you not waited, you might have experienced a lot of undue stress.
3. Out of Sight, Out of Mind
This may be a very powerful concept in your fight to stop spending money and start saving. If you don’t see the money in your checking account, you’ll think you don’t have it and it will likely pressure you to spend less. If you are one of those consumers who regularly transfers funds from their savings to checking account to cover credit card bills, you may need to open multiple savings accounts at different banks.
4. Start an Investment Account
Savings accounts are important and create financial buffers during emergencies. However, they don’t help you grow your money because of low-interest rates. As an alternative, you can open up an investment account with a discount broker. Although some discount brokerage firms require a relatively high balance to open an account, companies like Betterment or Wealthfront don’t. These robo-advisors offer the benefits of financial advisors without the cost or fees, helping you achieve your retirement goals even if you need to start investing with little money.
5. Healthy Eating Isn’t Always Expensive
When it’s time to go grocery shopping, the most effective way to save money is to create a shopping list, use coupons, and eat beforehand. Don’t get sucked into buying something you normally wouldn’t just because you have a coupon or because it is on sale. Buy in bulk for items you use a lot of (toilet paper, dish soap, shampoo, etc.) and stay away from specialty food stores where food costs skyrocket due to specialty items. Finally, think about your health. The media and grocery stores like Whole Foods give consumers the perception that eating healthy and well is expensive. On the contrary, in the long-run, it is much cheaper when you calculate the emotional stress and health insurance costs of a bad diet.
6. Pamper Yourself At Home
According to Market Watch, Americans spent $33.3 billion on cosmetics and other beauty products in 2010. While you probably shouldn’t risk giving yourself a haircut, you can easily give yourself a manicure, pedicure, or facial at a fraction of the price. Get some scented candles, put together a beauty kit, invite a few girlfriends over, open up abottle of wine and make a night of it. With a little practice and an initial investment on products, there is absolutely no reason you shouldn’t be able to make yourself feel beautiful without breaking the bank.
7. Build Up Your Self-Esteem and Stop Showing Off
Another issue that seems to plague Americans is this need to be seen as successful or financially well-off. While some “ego” is needed for proper self-respect, some consumers tend to tie their success to the amount of material possessions they can accumulate and display, resulting in extravagant shows of wealth. But this group needs to ask themselves – “Do I want people to be my friend because of what I can buy or do for them?” No one wants to feel used and these so-called “friends” are often the first ones to leave you when times get tough.
8. Complete Some Financial Planning
If you have financial dependents, then your need to start saving money goes far beyond taking care of yourself in retirement. However, building financial security is a long-term endeavor and tragedy can strike any time before, leaving your family burden with mortgage payments, credit card debt, car loans, education expenses, and even medical bills.
For this reason, if you have anyone who depends on you financially, it is very important that you buy term life insurance from a top-rated company and protect your family. While life insurance isn’t a money-saving strategy or investment vehicle, it does provide you the peace of mind that your family will always be taken care of.
The Bottom Line
Learning to save money doesn’t have to be a frustrating ordeal. It may seem difficult at first, but much of it is common sense and learning to value financial security over material possessions and consumption. Once you start, growing your bank account offers its own satisfaction.
John Schmoll and Gary Dek are former finance professionals who are committed to helping new and seasoned investors make smart investment decisions.