How to stop spending money is obviously one of the biggest questions in personal finance. Of course, because it’s synonymous with saving money which subsequently allows you to spend or invest your money as you choose.
You may feel that when you do save, it’s just for a short period of time, then you eventually give into your impulses as your willpower diminishes. Maybe you also start dipping into that money that you have saved.
Luckily, there is a ton of research and real world application on behavioural design, that can help us understand how to stop spending money. Taking this into consideration There are 4 main things that you can do to stop yourself from spending money:
- Make It Obvious & Call-It-Out
- Increase Spending Friction & Make Saving Easy
- Keep Yourself Accountable
- Reward Saving & Make It Satisfying
Make It Obvious & Call-It-Out Method
The Japanese train system is famous for its efficiency and some of the highest safety standards in the world. One of the reasons for this is because they use the ‘shisa kanko’ which translates to ‘point with finger and call’ method.
This is where the conductors and people managing the platforms will literally call and point to the status of things they regularly need to check. As the train prepares to move onto its next destination,
From passengers on the platform to the time on the clock. In a study conducted by the Railway Technical Research Institute in 1994, pointing and calling was responsible for a remarkable ~85% reduction in mistakes while performing a test of simple, repetitive tasks.
New York City’s MTA subway system, whose conductors have used a modified point-only system since 1996 and within two years of implementation, incidents of incorrectly berthed subways fell 57 per cent.
Making large gestures and speaking out the status helps to keep focus and attention. Therefore it you feel you are about the give into an impulse buy, you should call it out and say something like “This purchase, will not add value to my life but will cost me future financial freedom”
Increase Spending Friction & Make Saving Easy
One of the reasons we frequently spend money in the modern era is because it’s so easily accessible. You can order products directly to your home with next day or even same day delivery.
Before the invention of online shopping you had to go into store to buy something and this in itself caused friction between your motivation and your behaviour.
In order to stop spending money, we need to intentionally create friction. If you are struggling to save money, then we need to make it more difficult to spend money. Here are a number of ways you can do this:
- Remove ‘google saved’ bank account details, so that you manually have to input them every time you want to buy something.
- Block websites on google chrome that you are tempted by so that you have to unblock them before visiting.
- Unsubscribe from emails from retailers.
- Delete apps from phones so that you have to manually visit the website
- Put the wallet in a locked drawer and put the key in a separate room, to ensure you have to make the extra effort.
- Put savings in a separate account at every pay-day
- Enforce a 24 hour or a 48-hour purchasing delay for every item you want to buy.
By contrast, make saving easy by paying yourself first every first and automating your savings. As this was made saving friction-less and saving habitual. Once you have the system for saving set up, saving money every month will be made effortless.
Keep Yourself Accountable & Apply A Fun Forfeit
Start first by setting some monthly savings goals and targets then try to stick to them. I choose to personally keep myself accountable by tracking my net worth as there is no hiding from a spreadsheet which simply totals up your account balances and indicates the change vs last month or last year.
You can also track your expenses using tools such as my ultimate money dashboard, which takes the effort out of manually tracking every one of your expenses. Get your exclusive discount when you join the MSU community.
You could also ask a partner or friend to check-in on you and each time you fail to achieve your goals, apply a fun forfeit such as:
- Do 20 press ups a day for a week
- Waring an embarrassing hat for a day (e.g. your favourite football team’s nemesis)
- Give a possession or money away to someone else
- Eat or drink someone you really don’t like the taste of
It is important to remember not to be too harsh on yourself if you miss a target as self-criticism can actually diminish your willpower. Resulting in you actually having less motivation to save money if you are too harsh on yourself.
Try to think of this as an experiment or a work in progress. Saving money is as much about analysis and trial and error as it is motivation. In fact, if saving money was based on motivation alone, most people would fail to save anything.
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Reward Saving
When we build good habits we need a tangible reward for saving that will reinforce the behaviour we want, just as previously we have applied pain to the behaviour we don’t want to see.
This component can be challenging with saving as usually saving money relies on delayed gratification; that saving money now will benefit us in the future. Therefore we need to increase the frequency of rewards in the present.
Accomplishing Short-Term Goals
As we mentioned above, tracking your savings will be an intrinsic reward every month if you successfully save money. Seeing money increase in an account will give you that feeling of winning that will feel rewarding.
This is especially if that money is being saved for achieving a future goal, material or experiential purchase. As you will see the savings pot for that product increase and grow quicker the more successful you are at saving.
External Rewards
This doesn’t need to be complicated, so perhaps every time you avoid spending money online you could say eat some fresh fruit or have a sweet sugary drink which will give you that dopamine pleasure boost.
If you accomplish your monthly go, or over-achieve it then you should feel entitled to a visit to your favourite restaurant or coffee shop for example. Life is about balance, as is saving and spending.
Gamifying Saving
You can also gamify your savings by adding money to a savings account for every time you manage not to ‘order a takeaway’, ‘go out for a meal’ or buy new clothes.
One further option is to tally up a habit streak of a certain behaviour, for example, no spend days or days where you spend less than a certain amount. Once you reach a certain streak count, reward yourself.
How To Stop Spending With The Promise Of Freedom
Knowing how and when you might be able to quit the rat race is a powerful motivator. Therefore, the idea of gaining financial freedom through passive income is extremely rewarding.
The first step towards this is understanding how to create passive income and the actions you need to take to start your journey to financial freedom.
Once you start to invest in this goal you will find that you are much more motivated to set up structures and processes that facilitate saving.
As a consequence, you will be more inclined to track your net worth, record your saving and analyse your spending. All of the above habits will stack upon this financial and lifestyle goal, which will exponentially boost your saving.
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