Do you remember during the recession when it was actually trendy to cut up your charge cards and get out of debt?
Well, that fad wore off rather quickly, didn’t it?
Americans have since resorted to their free-spending ways, and now total debt in the US has hit a new all-time record.”
Over the past several years, 6-year-term loans have become the norm for financing cars, according to Experian Automotive.
And subprime loans to business have skyrocketed – at rates equal to as much as 125% per year, when the fees are included. (You read that right – 125%.)
Borrowing creates the illusion that we can afford a better lifestyle than we really can. And sooner or later, the chickens will come home to roost. It’s never pretty when that happens.
But here’s the strangest part of this – relationships and experiences “buy” more happiness than more “stuff” does.
Not convinced? Here’s a quick way to prove my point. Do you remember what you got for the holidays five years ago? Or even two?
Didn’t think so.
Our family always used to exchange gifts at the holidays. One year we decided to skip that ritual. (I definitely didn’t need another sweater that looked like the ones my grandma wore.)
We decided to take a walk together through a beautiful park together instead. And to this day, I still remember that walk almost like it was yesterday. The cost? Zero – even the parking was free.
You’re probably not thinking about holiday shopping right now, but we’re all confronted with spending temptations all day long – Madison Avenue spends billions of dollars manipulating us into buying things we don’t want and don’t need.
So I’ve put together 7 tips to combat the games Madison Avenue – and your mind – play on you. I’ll be sharing a lot more proven strategies with you in my awesome new course in financial literacy that we’re just putting the finishing touches on now. It’s called Your Money Revolution. (We’ll let you know about a special offer on it next month.)
7 Ways to Spend Less and Enjoy Life More
Tip #1: Be Clear About Wants versus Needs
Those slick Madison Avenue types would have us believe that we “need” lots of things, from the latest techno-gadget to that trendy new shoe to a house in the Hamptons! They tell us that we’re not sexy/successful/cool without what they’re selling. Their messages haunt us and drive us to spend what we don’t have to buy what we really don’t want.
What do we really need? The recent Great Recession had one positive aspect: it helped many of us get very clear about “needs” versus “wants.” Stop and think about it and get clarity for yourself. And if you have children, teaching them the difference between needs and wants will empower them for life.
Tip #2: Curb the Impulse, Break the Spell
We’ve all been there: We’re in the checkout line at the grocery store and that Snickers Bar reminds us that we skimped on lunch and could use a boost. Whoosh! The bar flies into our cart! Or while running through the department store, we see a really cute blouse ON SALE. Zap! We find ourselves at home stuffing yet another blouse into our already stuffed closet.
An easy trick will help you curb that impulse. Next time you feel the urge to buy something you hadn’t planned to buy, simply clench your fist or flex your bicep. Voila! The spell is broken and you can actually think clearly again!
Tip #3: Wrap Your Charge Cards
Some financial representatives tell you to leave your cards at home to avoid temptation. It’s as if they’re saying you can’t trust yourself so you have to put your cards in jail. To me that feels like being shackled or depriving yourself.
I prefer to wrap my cards in my goals! Every time I take a card out, I see a picture or some words that represent a goal that’s important to me. I get the opportunity to stop and decide whether what I’m about to purchase is more important than that goal. If it is or it doesn’t undermine my goal, I might go ahead and buy it. If it isn’t, I get the satisfaction of knowing I’m a step closer to my goal because I chose to not purchase the item. It’s a win-win every time!
Did you know that financing major purchases through a Bank On Yourself plan can increase the typical family’s lifetime wealth by $500,000 or more without taking on more risk?
Tip #4: Big Happy versus Little Happy
We used to buy our grandchildren lots of toys for birthdays and holidays. And when they ripped open those packages, they did look pretty darn excited. I awarded myself extra Grandma points every time! But after every visit with our grandkids, I ask them what the highlights were – and their answer is almost always the hike we took or the visit to the river. Wise kids!
The Big Happy for most of us is having memorable experiences and being with the people we love. That other stuff we chase? That’s usually Little Happy – fleeting and not very fulfilling.
Tip #5: Be Consistently, Consciously Grateful
I’ve seen so much in the news about the benefits of gratitude lately! Studies have shown that a conscious practice of gratitude – such as writing in a gratitude journal for 5 minutes per day – has beneficial effects on our health, relationships, emotional well-being, and career. It lowers blood pressure, makes people like us more and even makes us better bosses.
But did you know it also helps you become a strategic spender? When we practice gratitude, we feel “wealthier” and more prosperous in all ways. Our self-esteem is greater and we just generally feel happy and appreciative of many aspects of our lives. Because of this, we’re less likely to crave material goods to feed an emotional need. And, studies have shown that having a grateful attitude actually enhances our ability to make good decisions!
Tip #6: Create Value Comparisons
A sneaky marketing secret is to set up “value comparisons” to get you to spend more. Here’s how it works: The restaurant wine list shows a wine that costs $165 per bottle. The truth is they don’t sell many of those. But because that high ticket item is there, they sell a heck of a lot more $100 bottles than they would without it! We unconsciously calculate that we’re getting a bargain because we bought the “lower-priced” wine.
Rather than falling for some marketer’s value comparison, how about setting up your own? Put a price tag on some things you really enjoy and value: A simple date night out with your partner might be $100. Family pizza night might be $55 or taking your elderly aunt to the movies might cost $35. Compared to those things, does that $100 bottle of wine (which is usually 4 glasses and a hangover the next day) seem like such a bargain?
Tip #7: Know Your Spending Triggers
In psychology, a “trigger” is an unconscious connection that causes you to feel and react in certain ways. You may not know the original cause but the reaction is very consistent. The scent of cinnamon may make you instantly starving and in dire need of a sticky bun. Sirens and lights flashing behind you may cause your palms to sweat and your heart to race even when you know the emergency has nothing to do with you.
The trick to working with your spending triggers is to bring them to the light of day.”
Do you feel driven to buy extravagant gifts as soon as the mall’s Santa shows up? When you have a rough day at work, do you crave some retail therapy to feel better? When you’re out with old friends, do you order the most expensive item on the menu? Are you triggered to overspend in a bookstore, hardware store, or swap meet?
“Know thyself” – and especially know your triggers so you can outwit them!
Use these tips and you’ll be amazed at just how easy it is to spend less and enjoy your life even more.