Favorite Money Mind Tricks to Cut Spending

By | 2016-12-08

Making a long term change to your spending requires the development of new habits. It may be opting for the generic brand, making your coffee at home or planning out your purchases ahead of time. Its not an easy transition, it requires some self awareness (some purchases are on auto-pilot) and self control. The best habit building technique I have found is to use Money Mind Tricks that shame your spending into submission.

Money Mind Tricks to Cut Spending

1. How many hours of work does it take to buy this item

This one is commonly used, but really motivating for the Freedom Seekers that despise going to work. Strip out your taxes and insurance premiums and figure out how many hours it takes you to pay for your next purchase. It could be the wake up call you are looking for to curb spending.

When I was working construction, I always chuckled at the guy who “wasn’t making enough” but spent $20 at the gas station everyday on cigarettes, energy drinks, pop and snacks. He basically smoked and drank away 2 hours of his paycheck WHILE working. Its tough to get by if for every 8 hours you put in the Government takes 2 and you throw 2 away.

2. What would compound interest do to item cost in 5, 10, 20 years

Shouldn’t be a secret that I like playing with compound interest projections after my “would you be a millionaire” post earlier this week. But thinking about purchases in terms of what they could do for you in the future is a great way to deter spending.

Mrs AE hates this game, especially while baby shopping. “Do you think she would rather have a stuffed animal that she wont remember now or a few hundred dollars when she is 18?” Does not go over well, but its true 🙂

The rule of 72 falls into this same bucket. Divide 72 by your expected return rate and it tells you how long it takes your money to double.

72/7 (Interest or return rate) = Money doubling every 10.28 Years

Especially powerful on large purchases – think of that $20,000 car turning into 40 or 60K…….. or more if you are taking a loan out to buy it.

3. How much extra are you Paying for Convenience

Whats $4 for a pop and bag of chips a few times a week? Only adds up to a few hundred dollars a year (twice a week would be $416).  Not only is this a waste of money on poor health choices,  its a terrible financial decision based on price per ounce.

Quick Example:

$1.89 for a 20oz pop is 9.45 cents/oz.

If you buy a 24 pack of 12 oz cans (288 oz) for $5 (common on sale price around us) it is only 1.7 cents/oz. Kinda crazy that convenience cost 5.5X for something as simple as a Coke. Pretty sure it tastes the same regardless of where you buy it.

If you know you are going to drink more than 1, buy the case at the grocery store…… In other words, look at your spending habits and start planning the purchases ahead of time. Don’t feed the convenience money wasting monster!

4. Using percentages to care more about small amounts

I wrote about my all-out-love for percentages a few months back, but I want to highlight how they make me care about small amounts of money. Whether its raises, purchases or investment gains – looking at everything with a percentage lens has altered our behavior.

Quick Example:

$1.70 vs $1.20 does not seem very significant, most people don’t bat an eye at paying the extra 40 cents and go about their day.  However, when I look at that difference, I see a 42% price difference. If you make that decision 10-15 times in a single shopping trip, it makes an impact.

On the flip side, you are making someone really happy by boosting there product margins and bonus checks (looking at you name brand price markup marketer).

Another way to look at the savings percentage on smaller purchases: if you would take it as a 0% risk investment gain, then why wouldn’t you take it as savings.

Are there any Money Mind Tricks you like to play to save more or spend less?

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18 thoughts on “Favorite Money Mind Tricks to Cut Spending

  1. Matt @ Optimize Your Life

    Really interesting that you list using percentages to care about small amounts. Last week I wrote a post about how people think in percentages naturally and that causes them to care too much about small amounts and not enough about big amounts. You’re more likely to go across town to save $100 on a suit than on a car, because it is a much larger percentage of the price of the suit. I guess the key then is to figure out when to think in percentages and when to think in absolutes.

    Thanks for a thoughtful post!

    Reply
    1. Apathy Ends Post author

      Thanks Matt, that is a great point to bring up and I totally agree with you that percentages could go the other way as well and your example highlights that. I was definetely looking at it from the multiple small purchases lens – $100 is a $100 bucks!

      Reply
  2. Amanda @ centsiblyrich

    I was introduced to #1 years ago when I first read Your Money or Your Life – love it. Your example is spot on (and rather sad)…most people don’t make the important connection.

    When I’m considering a purchase, I like to calculate cost per use. Of course, I have to estimate, but this really forces me to consider exactly how much use I’ll really get out of the item (or how soon it will end up getting donated). For example, how often will I really wear those cute three inch heels? Um…never. This really keeps household items, clothes and shoes purchases in check for me.

    Reply
    1. Apathy Ends Post author

      It is pretty sad to think about, but it seems so obvious after you figure it out

      Cost per use is a great way to think about purchases, I bet there would be a lot less “hobbies” collecting dust in the garage if people considered cost of use

      Reply
  3. Matt @ Distilled Dollar

    Great strategy! With modern day marketing, we’ve become desensitized to what the price really means. After accounting for taxes, fixed expenses, car, etc etc, our paycheck is not really $20/hr but $2/hr of SAVINGS. So maybe that guy was smoking away his entire savings while on the job!! Crazy!

    The one mental trick I use to help me save is to think about today’s savings as how many days I can afford at 65. I wrote a post a while back detailing the exact formula but once you find out that 1 day of work today = 12 days of early retirement, then it becomes EASY. Or at least, most of the time. 🙂

    Reply
    1. Apathy Ends Post author

      I remember that post of yours Matt, its a good one!

      I think he was smoking away his savings and then some unfortunately

      Reply
  4. n
    noname

    number one for me i read the book your money or your life it changed my life and my way of looking at money

    Reply
    1. [email protected]

      Agree here, I loved Your Money or Your Life! Don’t forget to take the time to calculate your “real hourly wage” and don’t just use the dollar amount you’re paid per hour. Instead its how much you actually take home per hour after subtracting out taxes, work-related expenses, etc. Also in your working hours you need to include time getting ready for work, driving to work, being at work, driving home from work, and decompressing from work.

      Reply
      1. Apathy Ends Post author

        Including the drive/getting ready time makes it a lot more interesting. an “8 hour” goes to 10 pretty quickly with drive time and the lunch hour.

        Thanks for the comment noname and Liz!

        Reply
  5. ChooseBetterLife

    Oh man, I can’t believe you wrote “Does not go over well, but its true” and expected us to let you get away with this. Your wife is super-excited for her first child. Please don’t make it all about money and make her feel like a miser. Make it about what the baby will love most, about what reminds you of happy memories from your own childhood, what you have space for, and what she’ll need. Or maybe you already have a few stuffed animals that are quite similar already.
    Yes, Of Course you’re right. But sometimes it’s better to be kind. I’m sure you can find a way to gently be both.

    Reply
    1. Apathy Ends Post author

      Oh, we are both really excited for our first child – and trust me we are not skimping on fun baby items, lots of stuffed animals and items that are definetely not necessities have already been purchased. We have been pulling cash out every paycheck and putting it in an envelope that she can spend on anything she wants, some of the stuff seams crazy to me but this solution makes it a non-issue.

      We balance each other out and I am not mean or rude when I bring money up, its more in a playful joking way that lets her know my opinion that leads to a conversation. That line probably comes of in a tone I didn’t intend it to.

      Appreciate the comment!

      Reply
  6. Penny @ She Picks Up Pennies

    Ahhh. It’s such a hard balance. Because if I go too deep, I’ll never buy anything again. In fact, I hobbled around for half the school year last year convinced the I was having back pain bad enough to lay down during my plan time every day because I was turning 30. Turns out, my refusal to buy new shoes and inserts was the problem. I play a lot of these same games, but I also try to remind myself that there are certain benefits that might not have a number associated with them (unless you look at chiropractor bills).

    I also try to be really cognizant of the fact that I’m not guaranteed tomorrow. So while I’m all about planning ahead, there are certain creature comforts that I’m trying to welcome back into my life without turning into full-blown Spendy Penny again. Balance, balance, balance. I’ll figure it out one day.

    Reply
    1. Apathy Ends Post author

      Thats a great point Penny, I do the same thing with shoes and even though I hate buying new ones have just accepted that you need to a. replace worn out items, and b. buy quality ones.

      We both have a lot of creature comforts that we never gave up and I think they are super important. Like you said its all about the balance.

      Appreciate the comment!

      Reply
  7. Mrs. Groovy

    These are all great strategies. Number 1 is pretty powerful. Often times you can see the silliness of your own ways when you realize you’re busting your butt for three hours in order to buy some piece of junk!

    I’ve wrestled a bit with number 3 when it comes to groceries. I know I should buy heads of lettuce rather than buying bags of lettuce. The heads of lettuce are much cheaper and stay fresher longer. But, I find I’m less motivated to prepare salads if I don’t have the convenience of the bags. My compromise is that I only purchase bags of salad at Aldi, where they’re cheap, or in a regular supermarket when I see them on sale.

    Reply
    1. Apathy Ends Post author

      Groceries is a tough one for us as well, the balance between convenience and price sometimes comes down to will we actually use the item or not. If we know we have a really busy week coming up we try to plan accordingly and might end up paying for meals that are easier to make.

      And yes, busting you butt to pay for something you never use is pure silliness.

      Thanks for the comment Mrs Groovy

      Reply
  8. [email protected]

    Nice tricks! Most of them are useful, but I like number 3 particularly.

    Number 3 sounds really true and it’s what I’m going to try. Cut convenience and save more! I never really viewed it that way, I would always buy the smaller packs since I never thought to “stack up” on drinks. But over the course of time, I know I would definitely drink a lot. If I get the bigger pack, not only will I save more, but I’ll save time too since I have to make lesser trips to the supermarket.

    Reply
  9. F
    Full Time Finance

    I might add one more, something I wrote about early on. Waiting. So much of marketing is about have it now impulse buying. If you can wait a few weeks to buy then your more likely to know if it’s what your really want. In the process the price may also possibly drop. Win win. Combine that with viewing things in terms of the hours to earn it and you can really ensure you buy what you value.

    Reply
  10. Laurie @thefrugalfarmer

    #1 works wonders for us. It puts a whole new perspective on whether or not we really need – or want – what we’re considering purchasing. Good stuff!

    Reply

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