Are you a born spender? Many people are. Recent research shows that it might even be genetic. Still, like many genetic predispositions, just because it’s inside you doesn’t mean that you have to let it out.
If you’re a born spender, here are some strategies to become a born-again saver.
Automate It and Forget It
Almost every financial expert agrees: The best way to start saving more is to automate your savings.
When you put your savings on autopilot, it’s easier to forget that you even have the money to spend. Most banks allow you to set aside a certain percentage of every deposit in a linked savings account. What’s more, you can often set this up easily in your online banking portal.
Setting aside 10%, 20%, or even a full third of what you make every time you get paid, before you even pay your bills, can be a great way to stop spending so much.
The Envelope System
Another simple way to save more money is to spend it the way your grandparents did. It was common in years past to put cash for certain expenses into specific envelopes. So you’d have an envelope for groceries, an envelope for gas, and envelopes for other regular expenses, each filled with only the amount of cash you want to spend in that category for the next week or month.
Then, you spend only what’s in each envelope on each expense. When you run out, you simply stop spending.
Because cash is tangible, and you can physically see it vanishing before your eyes, studies show that using it helps some people keep their spending in check. It’s going to have you thinking more about what you spend, rather than just swiping your debit or credit card whenever you need to make a purchase. And when the envelope’s empty, there’s no hiding the fact that you’ve hit your limit.
Many people, especially those with lower incomes, think that budgeting is for someone else. But no one needs budgeting more than born spenders.
Budgeting begins with tracking your spending — looking at where you’re spending your money over the period of two or three months. You’ll get a sense of your fixed expenses, such as rent and utilities, that can become the basis of your budget going forward. But patterns will also emerge from your discretionary spending habits that will help you realize where you want to be spending your extra money, and where you could probably make some cuts.
Just by paying attention to what you’re spending money on, you’re going to find places to save. Then, when you sit down to make your budget for the next few months, you’ll start making choices about where you want to spend money and where you don’t.
Ask Yourself If You Can Afford It When You Buy
One thing born spenders are almost universally guilty of is deciding whether they can afford something after they’ve already purchased it. But one of the great things about modern mobile banking is that you can look at how much money you have in your account at virtually any time. So before you buy something, pause for a minute, check your balance, and ask yourself: Can you really afford this? (Even waiting just 10 seconds can help you better decide whether that item is really worth the money.)
And don’t forget about your budget. It should include some money for splurge spending. You can either spend out of your splurge fund as you go — but not beyond the limit you set — or you can use it to save up for something extra special. The choice is yours, but spending on whatever you want whether you can afford it or not is just going to land you in debt.
Stop Using Credit Cards… Mostly
It’s good to have and use credit. You want to have a solid credit score if you ever want to buy a house or get favorable terms on a car loan. However, you can get a good credit score without using credit very much at all — and carrying a balance has nothing to do with your credit score, according to credit expert John Ulzheimer.
That doesn’t mean you should close your credit cards. But simply holding onto them without using them much will have a positive impact on your credit history over time — and help keep you from overspending.
Studies show that people tend to spend more when they use credit cards than they do with cash. So if that sounds like you, use plastic sparingly or develop a simple budget around your credit card. We’d recommend getting a no-annual-fee credit card for gas and groceries that offers you rewards on those regular, fairly fixed purchases you’d be making anyway.
Then, make sure you pay off your balance every month like clockwork. Consider opening a second checking account to pay off the card: You can transfer the money you’d be spending on gas and groceries into that account and pay the card automatically from there, so you don’t spend the money elsewhere first.
Know What Counts as an Emergency
If you don’t want to eat too much into your savings, you’ll need to know what counts as an actual emergency and what doesn’t.
Emergencies are unforeseen expenses related to your core needs. We’re talking about the transportation you need for work, a house you need to sleep in, health care costs from a sudden injury, or emergency travel for health reasons or a death in family.
Anything else needs to be planned for. An impromptu visit from your in-laws, a bad day at work that results in retail therapy, or a sudden desire to install a fence around your yard does not warrant tapping your emergency savings.
Being a born spender might be an accident of birth. But becoming a born-again saver is something anyone can aspire to.
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