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5 tactics to help control discretionary spending

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The budget battle is often won in the field of “needs”, not “needs.”

Housing, transportation, utilities, food … these are non-negotiable in any budget.

And while you can undoubtedly make economies here (the line between need and desire is not always clear!), You can not completely eliminate these budget line items.

On the other hand, as much as 50% of your spending is likely to be flexible if you subscribe to the popular “50/30/20” budget wisdom. (50% of your income goes to fixed expenses, with the rest allocated to variable spending and savings.)

You could buy a new sofa, but unless you are really without a seat, you do not have to.

You would like a new coat, but if you are not really at risk for hypothermia, this is an optional purchase.

You should definitely eat, but you do not have to eat every meal in a white tablecloth restaurant.

If we start by assuming that as much as half of your spending is to some extent discretionary, how can we use this knowledge to keep our spending in check?

delays spending decisions

What drives your desire to spend?

To begin with, you know why. If a purchase does not have to provide in a basic necessity of life, what is it for?

The question to ask when facing an optional purchasing decision is: “What is the opportunity cost of this item? ”

It will be up to you to decide the dollar threshold that justifies this level of analysis; this level of thinking probably does not apply to a cup of coffee.

Conversely, the sticker price of a typical smartphone is $ 1000. What can you achieve with that amount if you waive the purchase?

Yes, we’re talking about your goals. If your goal is to pay off your student loan, buy a home, or travel the world, how much will that $ 1,000 purchase delay your goal?

Actually do the calculation! There are a number of good online tools like this Savings Goal Calculator that can help you make smarter financial decisions.

If you think the delay is worth it, you should do it anyway. My suspicion, however, is that this slight pause in your thought pattern will often lead you to put the phone back on the shelf.

How can you create the time and spiritual space for this pause to take place?

The key is to add a little friction to a transaction or even a delay when you are offered a spending opportunity.

Then have a set of rules in place to filter out every meaningful purchasing decision. (Not every rule works for every type of purchase.)

5 Guidelines to help control spending

Here are some delaying tactics / spending rules I like:

1. The In & Out Rule. (No, not a hamburger!) You can only buy X if it’s a substitute for Y. It not only forces you to research what you really need, but it also reduces the clutter. Marie Kondo will be proud!

2. The No Credit Rule. You can not buy anything for which you can not immediately pay in cash or with a debit card. This is a particularly useful guideline for discretionary “service” purchases such as restaurant meals, entertainment events and holidays.

If you do use your credit card for convenience or security reasons, you must be fully prepared to go online and pay off the new charge immediately. Do not even wait for the monthly statement to run.

3. The Amazon Shopping List Rule. It’s a variation of the well-established “24-hour rule.” If you identify something online that you want, put it on the online shopping or favorites list, not in the shopping cart.

If you still think about it a day later, keep thinking about it for another day. In fact, I believe the 24-hour rule should be the one-week rule. If you’re still obsessed with the idea of ​​having it a week later, well, go for it … but very often you will not.

Believe it or not, “window shopping” (even an online window!) May have fulfilled a need you had more than buying the actual item.

4. The savings rule. If you have done the mental homework to evaluate the opportunity cost of a significant purchase and have decided to move on, just stop there and ask the next question, “Should it happen now?”

If it is not a matter of health, safety or the ability to earn a living, the answer is probably “no.”

Embrace the guard if you do not have the cash on hand.

If your bank allows it, set up a dedicated savings account (like Ally Bank’s “buckets”) just for this future purchase.

It can be a great motivator that enables you to see progress towards your goal and leave your regular rainy day savings balance intact.

But if you have to borrow for an essential expense, you have nothing to apologize for. And for that reason, you should not hide from the reality of the debt and pretend it will disappear quickly if it, realistically speaking, does not.

Use an online calculator to see exactly how long, with interest, you will have to pay for this purchase.

* Related reading: What are sinking funds and why it is important to have them

5. The Take your cake and eat it too rule. Can you borrow the item from a friend or family member?

Is there a social media group you belong to that regularly matches lenders with lenders in your local community?

It can be an excellent option for everyday items such as utensils, specialized cooking utensils or appliances, books (including the library, of course), camping equipment or lawn maintenance equipment.

Can you rent it?

You can also extend this rule to large ticket items such as cars (Do you have to own a car 365 days a year, or can you use a vehicle share and / or conventional car rental for your occasional needs?), Formal wear, and even homes (Should you buy a vacation home when Airbnb and the like are widely available?).

Final Thoughts

The act of saving money does not make you morally superior. It is not realistic or necessary to lead a life where none of your needs are met.

When you use the “rules” and tactics above, you get an opportunity to practice awareness in your spending decisions.

The only bad purchasing decision? One that does not match your values ​​and goals.

Next: Make saving just as much fun as spending

Lisa Whitley Headshot photo

Article written by Lisa Whitley, AFC®, CRPC®.

Lisa enjoys having money conversations with people from all backgrounds every day. After a long career in international development, she brings a cross-cultural dynamic to her current job to help individuals and families achieve financial well-being.

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