- Think things through
Farnoosh Torabi, author of Psych Yourself Rich, explained a few mental approaches on a Huffington Post blog. First is to give serious thought to your purchase. Pressured? Rushed? You’ll spend more recklessly.
- Examine your finances regularly
Is your budget fine the way it is? So-called status quo bias means you’ll keep paying what you’re paying – credit cards, pay TV bills – unless you have a compelling reason to change.
- Saving money is relative
Behavioural economist Dan Ariely says we’re bad at making comparisons: we may readily pay $3000 to upgrade to leather seats in a new $25,000 car because it’s a relatively small percentage of the total price, but we’d think a lot longer about paying $3000 for a new couch we’d sit on every night.
Ramit Sethi, who runs the website I Will Teach You To Be Rich, gave some tips on increasing financial willpower to the Bucks blog of the New York Times. Key? Pay bills automatically to avoid late fees. Similarly, channel a portion of your salary to your savings accounts.
- Start small
If you’re overwhelmed by choices, it’s easy to do nothing. “Instead of trying to save a little bit on everything,” Sethi says, “focus on your two biggest discretionary expenses,” like eating out and drinking, in his case. Over the following six months, cut each down by 25 to 33 per cent.