4 Psychological tricks to save more, spend less, and pay off debt budgets are sexy gas vs diesel engine


Today I’d like to show how I trick myself into spending much less money without the need for budgeting. I use three different psychological tricks in three categories: Survival, Slavery, and Mileage. I’m giving you three so you can pick the one that best resonates with you!

Decades before I was born, personal finance titan Dave Ramsey packaged and promoted a method of paying off debts called the “debt snowball.” In this method, you pay off your debts one at a time, from the smallest to the largest – regardless of interest rates on the individual debts.

Eventually, SCIENCE weighed in on the long disagreement. Researchers at the Kellogg school of management studied the records of a debt collection company to reach an unbiased conclusion. It turns out Ramsey’s right – the Debt Snowball method has a much better success rate than any other method of paying down debts.

Let me say that in another way. More people succeed in paying down all their debts using Debt Snowball than an interest rate optimized strategy. When it comes to changing personal finance habits, psychology counts, not numbers. Those tiny early victories build stamina for the struggle ahead. Paying off that first debt feels monumental and lets you prove to yourself that debt-free is possible.

But paying down debt is just a small piece of the personal finance mosaic. Many readers of this blog don’t have any debt at all, and are just interested in building their savings. Well, good thing you’re still reading! Because I’ve got yet more psychological tricks to reduce spending, build savings and change how you think about your money.

I’m going to share three of my tricks with you. These techniques have helped me reduce my expenses enough to achieve self employment ,and an imminent early retirement in my 20’s. And they’re all so simple you can begin today! Your Survival Number

Try this: calculate how much money you need for a decent survival each day. Count all important expenses, but aim to come up with as low a figure as possible. For me, this number is $26. That includes fancy things like an entire pot coffee every day, a nice apartment in frozen Alberta, and pretty damn good home cooked food. Your number may vary if you have kids, a spouse to support, soul crushing debt, etc.

Keep your survival number with you during your day. Write it on your hand if it helps. For most people, reducing expenses is about changing their day-to-day habits, not increasing their salary or saving a bunch of money on car insurance. Those small, easy-to-ignore expenses will seem much bigger when compared with your survival number.

You can get more granular with it too, play around a bit. My fairly overpriced internet costs $2/day – which provides for almost all my entertainment and education needs. For what I get out of it, I consider it money well spent. But would I spend an entire day’s internet on a single Starbucks coffee? How Many “Energy Slaves” Could That Buy?

An Energy Slave is that quantity of energy (ability to do work) which, when used to construct and drive non-human infrastructure (machines, roads… etc) replaces a unit of human labour (actual work). An energy slave does the work of a person, through the consumption of energy in the non-human infrastructure.

Remember when I told you I spend $26/day for all my living expenses? For those of you who would rather not do the math, that’s $9,490 per year. It turns out the average adult in my country spends more than three times that. I found that out on the excellent Stats Canada website, which catalogs statistics like this.

To do this math for your own household, divide the average expenditure for your household type in your state or province by your own expenses, and find your money mileage multiplier. As with all my previous tricks, take this number with you and integrate it into your routine. Revalue that $4 deli sandwich at $12, is it still worth it? The more you multiply, the less you’ll want to spend, which in turn will bring your money multiplier even higher!

Trevor van Hemert makes things, mostly bad jokes and websites. His experiments litter the internet like corpses after a battle. By far the least terrible of these sites is about 5 gallon buckets. His newest tepid creation is about mason jars. [Authorship: Trevor+]