Behavioral Tricks to Get Yourself to Save

Wednesday, April 14, 2010 - 10:29 AM

Think you’ve tried everything to save more money but are still coming up short of your goals? Here are five tips to boost your bottom line, based in the increasingly popular field of behavioral economics.

  1. SET YOUR CELL PHONE OR COMPUTER TO REMIND YOU TO SAVE. A 2010 study by economists from Harvard and Yale and co-authored by Jonathan Zinman of Dartmouth found that bank customers who were reminded of their savings goals with monthly text messages stashed away six percent more money than those who didn’t receive reminders. So set your calendar on your Blackberry or an alarm on your cell phone to remind you of your goals. Use post-its, refrigerator magnets, screensavers, mobile alerts—whatever works for you. More simply, contact your bank and ask them to automatically withdraw a set amount—say $50 or $100 a month—out of your checking account after each pay period and have it transferred to savings.
  2. DON’T LET YOUR COMPUTER MAKE IT TOO EASY TO SPEND. With popular websites like Gilt Groupe, Groupon, and RueLaLa offering deep discounts to your favorite retailers, you don’t even have to leave your desk in order to blow money on shopping sprees. Erase your credit card information from tempting sites, don’t allow them to save your passwords, and delete bookmarks to places where you’re likely to spend. But do use sites like bankrate.com to get the lowest rate on credit cards and billshrink.com to see if there’s a better cell phone or wireless plan for you.
  3. USE CASH NOT PLASTIC. A classic 2001 study from MIT found that people were willing to pay twice as much for the same items when they paid with credit cards compared to when they paid with cash. So stick to an all-cash diet. Another 2008 study by Priya Personal Raghubir of NYU and Joydeep Srivastava of the University of Maryland, found that people tend to treat credit cards and gift cards like “monopoly money”—meaning that plastic feels less real and people are less careful about overspending with it. Take out a fixed amount of cold, hard, cash from the ATM each week and hold yourself to that sum of money to get you through the week.
  4. CHECK YOUR EMOTIONS. Research from British psychologists done in 2009 and other studies by American psychologists has found that we’re willing to spend more money when emotions run rampant. In fact, in one famous study from Carnegie Mellon, participants who’d been shown a tearjerker about a dying parent were willing to fork over almost four times more for a bottle of water, compared to people who’d been shown a documentary about the Great Barrier Reef. Save your shopping for your mellow moods.
  5. SHOP WITH FRUGAL FRIENDS. Studies show that friends (and even friends-of-friends) influence everything from how much you weigh to how much you smoke. And at least some unpublished preliminary research seems to show that friends can influence how you can spend as well. Next time you’re planning a big-ticket purchase, bring a frugal pal shopping with you. Take your spendthrift friends on a run instead.

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Comments [6]

Chris from Florida

It is often helpful as a first step to write down every expenditure one makes for about three months in a small notebook, to get a solid sense of where all the money is going that comes into your life. We all tend to kid ourselves about the little things we spend money on.

Apr. 20 2010 08:25 AM
tf from ny

Some ideas on saving -

1 – as noted above, first thing is to never see it. Right into savings (and make sure it’s paying something decent (online svgs is at least 1% vs .02% like my money mkt)

2- w/o changing lifestyle, many things to do by buying / spending smart. Groceries, sundries, cereal: buy when on sale. Rite aid, cvs –duane reade, ck their flyers. Clothes – buy on sale (I go to barney’s warehouse and pay like 300 all in for a suit). Shoes, suits: good rule is to buy half as many, pay twice as much. Never ever run a balance with a credit card – unless it’s like 1st 6 mos w/zero interest. If you’re day or so late, call cc co and ask them to kindly waives late fees and fin’c charges. They almost always will. Same with annual chgs. (I got a no on behalf of wife’s acct, so wrote ceo and his asst gave us 350+ credit for charges going back a few yr – I’d initially asked for less but upon escalation, asked for everything over last 5 yrs or so)

3- dating and entertainment – would say same as suits and shoes (fewer dates but higher quality), but we don’t always have that option. When out with buddies doing rounds, I love doing the kitty thing (which keeps you from getting saddled with buying extra rounds and also helps you avoid guilt of having someone pay for it all). Amazing how much partying I could do in younger days – and all on a shoestring budget. We’d knock down a beer or two at home, grab a slice and or bagel and then go out. 400 a month would be plenty – but that was the 80s. same principles apply nowadays but may want to actually sit down and enjoy a meal. Definitely cut out end of night unnecessary rounds. That can end up saving you like 50 bucks a month. Cutting out unnecessary meals can save maybe couple bills a month. Plus, it’s more of a treat if you’re not dining out all the time. Now that I’m married, I miss those bagel / pizza meals.

4 – transport. I use my bike. Very little spent on cabs or even subways. Get decent used bike, good lock (on sale thru transport alt), helmet, light and away you go. Rides home late at night are the best.

5 - I love being married, love my wife and our baby but much harder to control costs when it’s more than just yourself. Really wish I could continue my thrifty ways but that’s impossible. Thus, rec that singletons save while you can!

Apr. 14 2010 12:27 PM
paulyrulo from florida

One thing people fail to do is to commit to saving some of what they earn. I once learned that "there is a finite amount of money you will earn in your lifetime, and once you spend it, it is gone". I failed to realize this when I was young. At age 42
I embraced this concept and it made me change my whole attitude about saving. It went from a non priority to the TOP priority. What I did was commit to saving 25% of what I earned each week by automatically placing that amount in my savings acct as the first deduction from my paycheck. I committed to the strategy that I will pay myself first and then take care of the bills. Of course that commitment meant I needed to scale back my wasting my hard earned money. I know this sounds high to most people, but I knew that for me it would be easy to do this and still enjoy life. In fact it was so easy that I never felt that I was missing out on anything.
Before long my acct grew and that encouraged me to save even more, so some months there is even more to put away. Believe me, I am not cheap...my wife and I go out to dinners, take semi annual cruises and entertain our family and friends very often. What we avoid is buying crap and unnecessary things that most people waste money on. We dont have a 60' HD TV (to watch commercials on) but enjoy our 27" TV very much. We dont go to the mall on weekends (in fact we avoid it because of all the chaos and mayhem going on there) since we enjoy life thru doing things and not buying things. When we really need something, like a camera or music cd's we purchase on Ebay and save a ton for those items. There are many many endeavors in life that dont come at a high cost...the beach, the library, not buying junk we dont need.
So my message to people is to reevaluate their lives and see what really gives enjoyment and gratification. I think that if we embraced the attitudes of our parents and grandparents we would learn that buying stuff only wastes what you could have saved and really doesn't ensure happiness. Some of the happiest people I have met live on less and yet know that the true happiness in life is the relationships they invest in via their family and friends. Put that money away for a rainy day and take stock in your relationships....save before you spend is my mantra.

Apr. 14 2010 11:21 AM
Peg from Southern Tier NY

Your utility bill is a good place to start to look for monthly savings. Many people are able to cut their costs in half (and more) by Paying Attention to wasteful utility habits.

Some of the most wasteful habits involve heat - think about less use of your heat creating appliances - oven, iron, dish washing machine, clothes dryer, hot water heater, lights... (are you guilty for reheating a single slice of pizza in your 450 degree oven? - you are burning good money by doing this).

...and less use of your cooling appliances - air conditioner (?needed to cool down a house too hot from baking?), freezer and refrigerator doors open too long?

Make yourself a challenge to lower your utility bill every month. It's good for your pocket book and the planet too.

Apr. 14 2010 10:06 AM
Valerie from Brooklyn, NY

1. Avoid temptation. If you know you'll be tempted to buy something at your favorite store, stay away from its shop or website.
2. Make a shopping list and stick to it. At the supermarsket or drugstore (dangerous places for those of us with kids!) make a bee-line to the products on your list - milk, bread, etc. Don't get distracted by the "sale" items, or "buy 1, get 1 half off" offers. You'll only wind up spending three times the amount you've gone in for. And understand the reason why all supermarkets are laid out the way they are - so you have to go through all of the aisles of candy. tv dinners, cookies, ice cream, toys and other things most people really don't need in order to reach the products you probably came in to buy - milk, bread, cheese or meat - that's located all the way in the back of the store.
3. Learn to say "no" to your kids at the store. One co-worker of mine shops at a local deli rather that go to a huge supermarket because she can go in and get the basics she needs without having to go up and down long aisles with tempted, nagging, demanding children who want everything they see. The last straw for her was a trip to a local Rite Aide to buy diapers for her youngest child. At the checkout line there was a large display of toy cars her two older sons went crazy over. She told me it took her several minutes to seperate her kids from the cars, but giving in to them would have set her back around $15, more than what the diapers cost. Shopping at a local drugstore or deli can be a few pennies more, but I find cheaper in the long run because you go in for the items you really need. For those of you who like the variety and prices of larger chain supermarkets, I would go when someone can watch the kids at home and stick to the shopping list.
4. Leave the plastic at home. Most people think twice before pulling cash out of their pockets and have a harder time justifying a "need" for an item when they're paying cash.
5. Be very aware of when you're 0% (or low) interest offers on your credit cards expire. Use that time period to pay down your debt, as everything (or most) of what you're paying will go towards eliminating your balance, not towards interest.
6. Pay down your credit card with the smallest balance first, so it will be easier to eliminate. Then continue to pay off the others.
7. Consider a lifestyle change. Does one really "need" to live in Manhattan or any other "trendy" neighborhood? My move out of Manhattan to Brooklyn (in a nice neighborhood) cut my rent exactly by 50%. The other 50% savings allowed me to pay off my credit cards in a reasonable amount of time.
8. Get counseling. A financial counselor may be able to see or suggest things that we can't see ourselves, because money can also be an emotional issue. Many organizations do free counseling, and can offer a long-term plan for those who are deep in debt.

Apr. 14 2010 07:17 AM
Brooke Allen from Glen Ridge, NJ

My parents taught me some things that made it easy to save:

1) Borrowing money is like renting a house. The principal is the home, and the interest is the rent.

2) If you would never think of skipping out on the rent, then never think of missing an interest payment. If you would never thinking of stealing the house you are renting, then never think of not paying pack the principal. If you do not pay back a loan, then you are stealing someone's savings.

3) Renting money to buy a house is not much different from renting a house, except that borrowing money to buy a house has higher transactions costs, carries more risk, and requires a longer-term commitment.

4) Savings is what we call the money that is left over. Live well within your means and savings is the byproduct.

5) You must treat other people’s money with much greater care than your own.

6) When you buy something (even stocks) with savings, you no longer have savings, you have ownership. Don’t become an owner until you can bear both the risks and responsibilities of ownership. You can’t afford to be an owner until you no longer have anyone relying on you to pay them back.

People who understand these things don’t need to trick themselves into remembering to do the right thing.

The key to memory is to attach the thing to be remembered to an emotion. If my statements illicit emotions (positive or negative), then mission accomplished.

Brooke

Apr. 13 2010 10:15 PM

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