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Do you want to save more money? Perhaps you’ve got an ambitious goal, such as saving for the down payment on a home or investment property, launching your own amazing business or retiring at 40…or perhaps you’re living paycheck to paycheck, without emergency savings - maybe both! If you aren’t saving as much as you want to be and you are like most people, you are judging yourself and wishing you were better with money. I invite you to think about it in an entirely different way.
If your budget isn’t working for you, it’s the wrong budget. If your earning, spending and savings plan is not working for you, it’s probably the wrong approach to budgeting -- for you. You are working against your own personality and decision-making style.
During my journey from someone who spent every dollar of her income to someone who is financially independent and a successful investor, I figured out that in order for something to work in my life, it has to work for me and how I’m wired. I learned that I react in certain ways to rules and structure, and that helped me tremendously in making changes in my financial habits. What spending/savings approaches work for me won’t work for everyone because not everyone is like me. This goes for you, too. Understanding your personality can change your life.
What’s your savings personality? Blockbuster author – and brilliant observer of humanity – Gretchen Rubin, proposes that when making changes in habits, it’s helpful to determine if you’re an abstainer or a moderator. In her work, she’s referring to decisions around food. However, as a financial coach, I see how this applies easily to money decisions.
Abstainers – none is better than limits.
According to Rubin, “you’re anabstainer if you:
- have trouble stopping something once you’ve started; and
- aren’t tempted by things that you’ve decided are off-limits.”
I am definitely an abstainer. I believe in making – and keeping – big resolutions, as long as they are my idea and aren’t externally imposed. It’s much easier for me to give up something completely that I really like to do than to try and limit myself to just a little.
I could eat the whole bag of Lay’s potato chips, so I won’t keep a bag in the pantry. I never hit the snooze button or sleep in. I quit smoking cold-turkey in my twenties. I do the best on diets when I eliminate something entirely, such as sugar. Financially speaking, I’ve been the most successful at rebooting spending when I’ve given things up: magazines, drinks in restaurants, an expensive apartment – even my car.
Moderators – less is better than none
On the other hand, Rubin observes, “you’re amoderator if you:
- find that occasional indulgence heightens your pleasure -- and strengthens your resolve; and
- get panicky at the thought of never getting or doing something.”
My husband, on the other hand, is a moderator. In general, he’s the kind of guy who cuts back, rather than eliminates. He’s a thin guy, but if he wants to lose a few pounds, he’ll just eat a little less. He sleeps in sometimes, like on vacations and weekends, without worrying he’ll permanently get off schedule.
Financially speaking, he’s the picture of moderation. When he balances a checkbook, he rounds up or down to the nearest whole dollar. He looks for ways to cut the cable bill (not cancel completely). He’s saved money from his paycheck for his entire working life.
How abstainers can save more
If you’re an abstainer, you’re all or nothing. You’ll find it easier to both give something up and/or do something every day:
Try the financial elimination diet. Give up every discretionary expense where you think you are overspending for a limited period of time such as a week or even a month. Areas where folks typically have the most wiggle room include eating out, clothing, beverages, taxis/Uber/Lyft and entertainment. When your elimination period is over, mindfully add back in expenses one at a time to see where your limit in that category should be. You may find that you can live without spending in certain areas for quite a while.
Give up something big. As I mentioned, I gave up my car for several years in the nineties so I could pay off student loans and build my savings. (Hear the story in a podcast.) I also gave up my lovely penthouse apartment and moved in with a housemate in a shared place. This really worked for me as I cut my expenses by more than $800 per month.
Track every expense every day. Give up a lack of clarity. Pick an expense tracking tool which fits your personality: paper and pencil, apps like Mint, Mvelopes or You Need A Budget (YNAB) or an Excel spreadsheet. See this article on the Best Apps for Tracking Spending.
Sell something. Clean all your closets and have a big garage sale to sell everything you’ve decided you don’t need. Try selling items online. Pay special attention to higher dollar items you’re not really using, like that panini maker or your mountain bike you never ride.
Set an outrageous goal. You’re the kind of person who goes big or goes home. Set a goal that’s only achievable if you make major changes, like saving for a home down payment in 2 years. Watch how once you’ve committed to it, you will use your ingenuity to save for that down payment.
How moderators can save more
If you’re a moderator, consider making small, incremental changes in how you manage your money:
Sign up for the automatic rate escalator in your 401(k). Set a reasonable target that’s still a stretch, such as 15% of your pay, that you’ll hit by raising your contribution rate 1 percent each year for many years until you get there. See this post for how it works.
Cut back your discretionary spending. Tracking everything you spend might not be for you. Try cutting back your spending on eating out, clothing, beverages, taxis/Uber/Lyft and entertainment by 10 – 15 percent. Give yourself a lower budget limit for total discretionary spending and put the cash for each category in an envelope each week if that helps you keep track. By just tracking the discretionary expenses, you’ll have the flexibility to spend more in certain areas if you spend less in others so you don’t have to feel limited.
Save your change. At the end of the day, take the spare change in your pocket and put it in a container on your dresser or kitchen counter. Once per month, count it up and deposit it in your savings. If you don’t spend cash, you can do this digitally with cool apps like Acorns, Chime or Digit. See the story of how my colleague Bri Doty learned to love saving and investing that way.
Find a side gig for 4-8 hours per week. You don’t want to give up all your free time, but you’d be willing to work a little extra to save more towards your goals. See some ideas in 7 Ways To Earn More Money Without Quitting Your Day Job.
Eat at home once more per week. There’s a secret financial power in home cooking. Give up on one restaurant or take out meal per week and you’ll save $60-$150 per month.
Try just of a few of these tips which fit your personality (abstainer or moderator) for a month. Does it feel easier now? After a month, you should know if it’s right for you.
If it is, the action will begin to feel easy to do as if it’s second nature to you. According to Rubin, there are four pillars to making habits which stick: monitoring, foundation, scheduling and accountability. At the end of every month, take the money you’ve saved by not spending and/or earning more and deposit it in an account for your goal (home down payment, Roth IRA, emergency fund, paying off debt/student loans, etc.)!
How about you? Have ideas you’d like to share? Send them to me at Cynthia.meyer@financialfinesse.com.
