After all, it’s not how much you make; it is how much you keep that matters.
Whether your income is $500,000 or $50,000, you can’t get ahead unless you live below your means. The best way for many to make progress with how much you save is by avoiding the emotional (see: regrettable) purchases As a result, savings tip #2 is to avoid emotional spending.
Get rid of the SOS (shiny object syndrome) mentality – the feeling of going out and having to buy stuff. – Mike Kawula on the YoPro Wealth podcast
So you have to understand why you are spending that money, but you also need to become aware of the decisions that you’re making and not let emotions get involved.
I categorize the biggest mistake people make under the idea of emotional spending. You can be emotionally spending and buy too many things on a day-to-day basis. There’s usually a reason why somebody is doing that. If those reasons go un-analyzed, that can be very damaging to a person’s financial situation. – Mindy Crary on the YoPro Wealth podcast
One way to avoid the SOS or lifestyle inflation is what I call, ‘The Honeymoon Rule.’ Here are the rules:
- Set your dollar amount (I used to use $100 as my limit)
- For any item you want that costs more than that limit, decide if it is a good purchase… but don’t buy it yet.
- If it is, then wait 30 days (2 weeks is usually good enough though).
- After 30 days, if it is still a good decision then by all means buy it. If not, then don’t.
Here is a real personal example of it in action:
| Item |
iPad |
Social Media Conference |
| Cost |
$499+ |
$800 (flight, hotel, etc.) |
| Decision in the Moment |
This thing is awesome! I’d definitely use it for browsing, movies, FaceTime and travel. |
This could be extremely valuable for my new venture. |
|
Decision After 30 Days |
I don’t have time for an iPad. |
This training could be a game-changer for me. Yes, I’m going! |
|
Why? |
I already have 2 phones and 2 laptops that I use daily, and a Kindle Fire to read on the plane. How am I really going to use this? |
$800 invested could easily make me $10’s of thousands of dollars with the relationships and knowledge I gain from it in the first year alone. |
So, in one instance I saved over $500, and in another I made a great decision on something that was going to make me a lot more money than I’d spend. This isn’t to say that you can’t buy awesome things, but you need to see things from a higher level and make sure that they make sense for you first.
With this view, you’re taking the emotions out of your spending. We often get in the ‘honeymoon’ phase where we see something as a need when in reality it is only a want. The results of emotional purchases are often buyer’s remorse and an empty bank account.
The best thing you can say with your money if you want to save more is simply, “no,” but I’m also a strong believer that you need to say “yes!” to experiences and memories.
The point is to become aware and make logical financial decisions. Do this and you’ll avoid those regrettable purchases and grow your wallet.
Action Item:
- Try the Honeymoon Rule out once and let me know the outcome – have your significant other or whoever is the most challenged saver (that’s a nice way of putting it :)) try this just once.
Contact:
- Mike Kawula (SelfEmployedKing.com) and Mindy Crary (CFP at CreativeMoney) are spotlighted in the book coming out this November!
