Does money slip through your fingers easily?
If so, you are having the same experience as the vast majority of people who complete my pre-coaching questionnaire.
Why does this slippy thing keep happening, even though we know it and it bothers us?
I believe the part of the reason is dead simple. In our western world there are way more wonderful things to spend our money on, than most of us have available to spend. And the trap is greater for those of us who consider that we are on a pretty good income and should be able to have it all.
Fast forward now to the point where we’ve realised life can include things like job losses, ill health, family emergencies, economic crises, car accidents, major appliance breakdowns – oh and retirement. What these situations mean is that the flow from the money tap can easily dwindle to a trickle or a major hole can develop in the bucket that the tap can’t keep up with.
We now have a higher purpose and the motivation to save. We realise that accumulating some funds is a good idea. Now we need to know how to save money fast. How do we change our ways and do that?
I heard a discussion on the radio this morning as I drove home from the supermarket, about studies that have shown that when we reduce the size of our dinner plate by about 20%, AND serve our own dinner on to that plate, we eat measurably less than when we have a larger plate. (So if you’re wanting to shed some fat, there’s a cool strategy for you!) We have a perception about how much we should eat that is linked to the plate that our food is on. One plateful of food equals dinner. This linkage of ideas is called an anchor.
We are really just like geese!
This reminded me of another fascinating piece of research about how we create anchors for the prices we are willing to pay for things. In the book “Predictably Irrational” by Dan Ariely, the author explains a study that shows we are all just like geese really. Newly hatched goslings latch on to the first creature nearby as their mother, and we latch on to notions of how much is ok to pay for things in a very similar way. He performed a study which showed that the subjects’ willingness to pay a higher price for a random object was strongly correlated with the last two digits of their social security numbers which he had earlier asked them to view. Of course there is no logical relationship between a random number on a card we carry, and what we should pay for a box of Belgian chocolates. However the people in the study did subconsciously form a relationship, and those with the higher digits on their card were prepared to pay more for the box of chocolates.
What is a reasonable amount to spend on a new pair of sports shoes? Is it $50, $100, or $300 for you?
What is a reasonable amount to spend on dinner for two when we eat out? Is it $30, $60 or $120?
When we’re considering how to save money fast, we need to consider what we’re normally prepared to pay for stuff, and whether we should pull up some anchors!
We form these anchors subconsciously (with the help of clever advertising and marketing) so changing them means we need to take a good conscious look at our spending. Why not choose three areas where you think you may be overspending a teensy bit. It’s different depending on your stage of life, and common culprits are
• eating out – either takeaway or restaurants
• mobile phone costs
• socialising and entertainment (particularly if there’s alcohol involved)
• hobbies or interests
How to be less Goosey
Now the trick here is to determine whether you can spend less and still be happy. If instead, you ask your nearest and dearest what they spend, you are either confirming an existing anchor, or creating a new one that is just as …erm… irrational.
You will discover how to save money fast if you find a strong reason to save, and test some of your spending anchors!
I love eating out, and in fact, one of my dreams for later in life is to eat out about 4 nights a week. However, at the moment I’m still growing my net worth, so that it can easily generate the extra funds to allow this. For now, I’m happy to eat out about once a week, and use discount vouchers as much as possible to keep the cost down below my reasonable number. I’m also happy to have a couple of meals a week that I consider “home-made takeaway”. These are things like oven baked fish and chips, or meat pies, or a tray of lasagne. They are quick and easy, but not quite as costly as takeaway from a restaurant.
How to save money fast can be turbo charged by simply putting the amount you wish to save in a separate untouchable account. That is – setting up an automated transfer that happens every time you get paid. Then you’ll have less to spend, and if your anchor happens to be the size of your everyday transaction account (like the size of your dinner plate) you’ll spend less without possibly even realising it!
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