9 Brain Hacks to Help You Save More Money
How I am increasing my ability to save money and in turn, improve my financial life
If you are looking for ways to exponentially increase your ability to save money and in turn, improve your financial life this is the right place to be. I will share with you nine brain hacks you can use to save more money.
Hack 01 — Pay in cash.
When was the last time you bought anything with cash?
In today’s day and age, the use of cash is almost nonexistent, with debit cards being the most popular purchasing tool to use at checkout. However, whether you pay with debit or credit, there is no substitute for the psychological impact that paying with cash can have on your spending behaviors.
When you pay in cash, three things happen.
1. The first is that your brain feels more pain when paying with cash than with debit or credit. This pain we feel when we spend with cash is due to what researchers call Coupling. When you buy an item with cash, you immediately know how much that item costs, which can be painful. However, when you pay with a credit card, there is a time period between when you purchase the item and when you have to pay for it, which makes the cost seem less important. This sensation alone causes most people to spend less and save more.
2. Humans tend to be hoarders of things with higher perceived value. And while this means it’s easier for us to spend $1 or $5 bills, it means that spending $100 bills is much more psychologically traumatic, which prompts us to save it rather than spend it and that means more savings.
3. The final psychological aspect of paying in cash is seeing the depletion of your money. When you pay in cash, you can see the amount of money you have on hand diminish. However, when you are paying with plastic, you do not get that same sensation. As a result, paying with plastic generally makes us spend more money.
But how much more will it cost you to pay on credit versus cash? In 2001, MIT published the results of a study analyzing spending behavior when spending with cash versus credit. The results highlighted the shoppers spent up to 100% more when using their credit card to pay instead of cash. Therefore, if you want to curb your spending employ this brain hack, then cut up your credit cards and start carrying around more cash.
Hack 02 — Start a piggy bank.
Now that you’re going to be paying in cash, you’re going to need a place to store all that loose change. This is where a piggy bank comes into play.
Before I had a credit card, I used to pay with cash all the time. However, I would then leave my loose change in my pocket or around the house, which meant that I never accumulated any real money in my piggy bank. Then one day, my dad challenged me to see if over the next year I could fill up my piggy bank with all those changes I would accumulate. Then he said that if I could guess the total amount in the jar when it was full, he would double it.
From that point forward, I deposited every penny I got back from my purchases into that jar, and come to the end of the year I had it filled. Then, the moment finally came when I was to guess how much I had saved during the past year. I held up the piggy bank as if I was able to weigh out how much would be in there and guess $234. My dad and I then went to the bank to get them to count it. The final count was $187.
Seeing my disappointment, my dad gave me an extra hundred dollars to deposit into my bank account anyway. But at that point, I learned two important lessons.
I learned that gamifying money helps you make positive progress in your financial life; and that I had one of the best dads on the planet.
Hack 03 — Capitalize on rewards.
Now I know that I’ve just gone over the benefits of paying with cash. But I know that not everyone is willing to go to the bank and withdraw money every week or every month for routine expenses, which means that I need to ensure that you are still saving money when paying with plastic.
Now it would be nice if everything in life was free. But since we need to spend money to live, you may as well make it worth your while by receiving rewards and other bonuses. Nowadays most credit card companies offer very lucrative reward programs to entice you to sign up. And these rewards usually come in the form of either cash back or points.
Cashback will usually range between 1% to 5% of each purchase or statement total. And these points will vary depending on the amount you spend and where. What I recommend is that you shop at stores that offer you the most cash back possible. So then you can lessen your total expenditures, and soften the psychological blow that routine spending can impose.
Hack 04 — Use automated deductions.
What if you could take all the effort out of savings so that you could focus on more important activities in your life, like your job, your family, or your friends?
Well, one way you can do just that is by leveraging the power of automated deductions. In fact, one of the best things I have ever done for my finances was setting up automated deductions for my pay with my employer. In essence, what these deductions allowed me to do was sent part of my paycheck directly into a savings account, instead of the full amount going right into my checking account.
When I initially set up this process, I allocated 10% of my after-tax income to my savings account. But over time, I have found I can up this to 20% and double my monthly savings.
So I think this savings technique has been so successful for two major reasons:
1.It allowed me to figure out exactly how much I wanted to save. In fact, by using automated deductions, you can set your deduction to the amount you have designated as monthly savings in whatever budgeting system you currently employ to ensure you hit your target figures.
2. It took the thought of saving off my mind, which allowed me to focus on other important things like improving my skills to make more money.
Hack 05 — Round up purchases.
What if I told you there is a way to save your loose change without paying in cash? If you’re like me, then you hate carrying around change. And thanks to rounding up purchases, you can save money and avoid change at the same time.
If you haven’t heard of roundup purchasing, here’s how it works. First, you need to set up this function with your debit card provider so that every time you buy on debit, greater charges are applied to your card than the value of the items you bought. That extra amount then deposits into a bank account you designate for savings.
Here’s an example of how this works. You go to Starbucks and purchase your usual latte, which costs you $4.35. Instead of paying $4.35, your card charges $5 and a difference of $0.65 deposits into your savings account.
Now as one instance, this won’t result in much savings. However, when done routinely over time, you begin to accumulate money in that savings account the same as you would if you were to deposit your loose change into your piggy bank.
Hack 06 — Real-time cost analysis
When you want to buy a shiny new item, what goes through your head? What is the true value of the item, or how much joy that new item will bring you?
I would argue that for most people, it’s the latter. However, if you want to save money, you need to assess the true value of the items you buy. One item I used to get sucked into buying regularly were new phones. I would imagine how great it would be to own the latest phone and enjoy all the new features that had to offer.
However, as you probably guessed the enjoyment I anticipated was short-lived. To truly assess the value of the item you are buying, you need to determine what your usage of that new item will look like. For me, I wanted a new phone for a better camera. However, I rarely took pictures. So the cost I was paying certainly didn’t justify the return I was getting.
When you start to analyze all of your purchases in this way, you will soon realize that you need to spend much less money than you are presently.
Hack 07 — Counting the clock
Another great brain hack that you can use to save more money is to use the counting the clock method. Essentially you are assessing how many hours of work every item you buy will cost you.
For example, if you make $20 an hour at your job, then buying a new $100 t-shirt is really five hours of your time. Once you perform this calculation, ask yourself if the item you were obtaining is worth the time it took to earn the money to pay for it. Or in this example, is that shirt really worth five hours of work time?
When you begin to see your purchases in this light, it will dramatically change how you perceive the value of not only your money but your time as well.
Hack 08 — The stranger test
You walk into a fancy store and see a t-shirt that you think would look great on you. Well, you now know that you should assess how much time you’re exchanging for that $50 t-shirt, you still feel inclined to buy it. So before pulling out your wallet and completing the transaction, you should be running yourself through the stranger test.
If you’ve never heard of the stranger test before, let me explain it. Imagine a stranger standing in front of you. On one hand, they have a t-shirt. On the other hand, they have $50. Which would you rather have?
In most cases, the cash is probably more appealing than the item. When taking this approach regularly you start to see yourself continuously picking the money over the item, which solidifies your position in not splurging, and it said keeping that money in hand.
Hack 09 — Internalize saving
Well, all the other hacks are very useful when it comes to saving money. The number one way to dramatically increase your ability to save is to tell yourself you’re a saver.
Using these hacks will help you make better money decisions. But until you tell yourself that you are a saver, you always feel as if the act of saving is going against your own free will. Instead, tell yourself you’re a saver.
When you do this, you will be more inclined to take regular action to save money, since your actions will be aligned with your core values.
Once these values are in place, you will also be more inclined to set money goals revolving around saving which, when pursued with consistent effort will ensure that you not only hit these goals but also achieve your stated savings target.
