Learning how to cut down on spending and not touch every spare penny was the hardest thing I’ve ever done.
I was always in the mindset that if I wanted more money I could always go out and find it. Be it by getting a side hustle, a raise or by the miracles of credit. I felt like there was always money to be found if I needed it. That led me to a very dangerous habit of overspending.
Don’t get me wrong. I wasn’t dumping $100’s of dollars every month on designer clothing and gadgets. No, I was spending $100’s on drinks with friends on weekends. To be honest I’m not sure what would’ve been worse. At least with the partying I was socializing, but it definitely was not good for my health (let’s not even talk about the close to pack of cigarettes a day I use to smoke). If you want to be rich, quit smoking. There, I solved all your financial problems.
So there I was, in my 20s, doing what I thought people in my age do, spending a good $500 a month on booze and cancer sticks. It soon daunted on me that much of the money I made at the job I did not enjoy went into my “weekend therapy sessions” at the local pub. It turns out I was making money in order to afford the luxury of complaining about my job. I’m sure many of you have been or know someone in that situation. So I did what any rational person would do and quit and found a different job, in a different field. I didn’t change my habits. I still went out, stil smoked and had very similar outcomes.
Better job – better life?
The new job was better. My going out became more celebratory than therapeutic. Changing a habit isn’t easy. It’s hard to say no to friends, but I finally learned how. Eventually I stopped going out all the time and kicked my awful smoking habit, but did my savings grow? Did I start accelerating my debt repayments by the $500ish I stopped spending on my outings? I wish that were the case. In my mind that money was spending money. I built a habit in which I was allowed to spend and so I did. I bought a lot of useless things. Ate out. The fact that I quit smoking and “was saving” $10 a day gave me all the excuses I needed to buy video games, overpriced products, treats, etc at a whim. If I wanted a coffee I would buy one because ” a coffee is $4 with tip and I use to spend $10 on cigarettes so I’m still $6 ahead” and then I buy another coffee and maybe a croissant…oh that ice cream shop just opened for business I should check it out… Sweet my favorite brewery launched a limited release sour… Thank god I quit smoking to be able to afford all of this! So you can imagine this didn’t lead me to greener pastures. Quite the contrary! I was very surprised to find that in my first month of not going out to party, not smoking, and overall cutting back on life expenses my balance on my credit card was higher than it ever was! It was because while I cut the bigger ticket outings off my list I never cut the habit of spending.
Track your spending – it’s easy
Being able to track your spending is key in helping you find areas where you spend more than you think you do. At one point my wife and I were collecting receipts on every dollar we spent. We also would withdrew our spending money and kept it as cash so we felt like we were spending real money instead of swiping plastic. It also gave us a really good visual of how our budgeting was progressing. When for example we wanted to go out to a show we could easily see how much money would be left until the next paycheck comes in. We would still pay our bills from our accounts but our spending money was cash. That helped us control the amount that we spent but we still didn’t really know where we spent our money. We had good intuition about it but no concrete numbers. We decided to get a spending tracker / budgeting tool. We got mint, but there are many more to choose from. That really helped us get a great birds eye view of our spending habits and really brought the point home for me about how frivolous I am with my money.
Who likes to budget?
I personally hate budgets. I don’t know many people who like them. I tried to use them (really, I did). I would occasionally sit down and write and rewrite a budget over the course of an evening trying to take everything into account, then explain everything to my wife who would listen only due to her love for me and not cause of any interest in the subject and them I would proceed to blow the budget after a few days for no reason what so ever. A conversation I had with my wife after I took me a trip to the gardening store
Her: that’s a lot of plants, how much did you spend?
Her: why did you tell me your budget is $100 for the plants and you spend $150
Me: cause they’re pretty… and I love you
I needed to change my mindset about it. So I did. First thing I started doing was asking myself whether I really needed the item and giving myself time to buy it. Gone were the days of walking into a store, seeing something useful and buying it. Nowadays, if I see an item that I find useful and really want it I go back home and do research about it. When a couple of weeks ago I saw a beautiful rain jacket on display at a local store I went home, researched it and found an equally nice (but different) rain jacket for $100 less. I also put a rule in place where I am not allowed to spend money on days I make money. I noticed those where the days I tended to over spend the most because I had a feeling that I earned the right to. That rule alone has really helped restructure my day and habits. I now have to wake up earlier in order to make myself coffee at home instead of buying it on the way. I also need to have food ready so to not buy any when I’m out.
I came up with this when I sat myself down and really I tried to analyse what type of spending makes me happy. Do I really need a tv (we haven’t had one in years), do I need to buy new workout outfit every time I sign up to a new activity, am I really going to appreciate that $1000 sound system or do I just like it when music plays loud? Do I have to go to this great restaurant or would a cheaper option be suitable (does a 50% increase in price make you 50% happier?) Do you need to live where you live? Rent is probably your largest expense aside from taxes. Do you really need as many rooms? Do they need to be that size? Do you need to live in the area you are living in? If you moved could you sell your car? Etc. There other approaches we are working on doing:
- Seeing what entertainment we like most and investing in bulk passes (paying for the gym yearly, instead of monthly for example)
- Investing in quality pieces of clothes that last a long time (like boots).
- Participating in activities that teach us; where we aren’t just consumers.
Until you start to spend less on a regular basis I recommend that you set your bank account to automatically take out a certain amount a put it away in some sort of investment vehicle (savings account that isn’t too easy to access) and learn how to live on unless.