Save Money Without A Budget
Personally, I love to make budgets. Planning things out, making spreadsheets, executing my plan, then figuring out ways to make it better is probably more fun to me than for most people. However, I realize that a lot of you hate budgets. For others, budgets are just a formality and they do not really influence your spending. By following my steps below, you will save money without needing a budget. Even better, this process will save you money not just once. You will save money on a recurring basis and in multiple areas of your life.
Phase 1: I Need This!
The first phase of the Getting Rich Young way of saving money, is when the thoughts hit your mind. “I Need This.” Even I get these thoughts multiple times a week. There is always a new tech gadget that I want, new bikes, or getting a house even though we won’t be in this exact area for more than another year or two. The feelings of want, desire, and need can often be overwhelming. Understand that there is nothing wrong with this! Just recognize the feelings as they come in.
For many of us, this is the end of the road. We whip out our credit cards and swipe with the utmost satisfaction. Unfortunately, that satisfaction quickly dissipates due to either buyer’s remorse or just the next gadget that is coming out. Frequently people who never make it past this phase find themselves going through this cycle over and over again. A life full of needs is a quick way to destroy your chances to retire early. Make sure that as soon as you recognize yourself saying “I Need This!” that you stop before pulling out your hard-earned money and move on to the next phase.
Phase 2: Do I Need This?
One of the most powerful things that you can do for yourself is simply ask yourself the question out loud, “Do I Need This?” or “Do I Really Need This?” Asking yourself these questions a few times may be all that it takes to stop yourself from making a purchase. This is because our minds have been taken over by psychological warfare that has caused us to become more impulsive as consumers. By creating a sense of urgency in our minds or creating a quick emotional attachment to the purchase, the advertisement agencies stop us from fully thinking about what we are doing.
You regain the power by asking yourself the question “Do I Need This?” It gets your brain to start thinking about whether this is really a need, or more likely that it is actually a want. Do yourself a favor and start thinking about your purchases before giving up your money. Remember, you had to work to get that money, so you are actually spending the time it took to acquire it. Time is money and the reverse is also true. If you still believe that you need to buy or that the purchase is worth the time that you are spending, then move onto Phase 3.
Phase 3: Delayed Gratification
So you’ve determined that you do actually need a new pair of shoes, a computer, a phone, a car, a house, or anything else. The next phase is to wait. That is it. Wait. I typically wait at least one week before revisiting the purchase. You may be groaning right now because you already determined that you need it, so why the heck should you have to wait a whole week?!
Have you ever heard the term, “sleep on it”? Well scientific evidence actually suggests that sleep promotes problem solving. It seems that this ancient maxim actually has some truth to it. What the study suggests is that when you sleep, your brain is better able to apply similar situations to solve problems. By waiting a week, you are giving your brain enough time to revisit this decision without you actively thinking about it.
The additional benefit that I have found from waiting a week is even more powerful. I usually forget about it! If it is something that I think I need, I will wait a week, and most purchases stop here. I never remember to go back and make the purchase. Sure, something will sometimes jog my memory months later and I’ll want the item again, but then I have to start the process over. By waiting, you give yourself the chance to forget.
Phase 4: Do I Need This?
A week has gone by and you still need to buy it. You have waited a whole week and now you deserve to be gratified! However, I’m going to have you ask yourself again whether you need it and whether it is worth the time? Remember, your brain has been working on this problem for a week in the background. You might realize, “Hey, I lasted a whole week without it. Maybe I don’t actually need it. Uggh. That Trip at Getting Rich Young was right…Time to buy some dividend streams with that money instead.” Just ask yourself again even if you do not want to. It does not take long, and you may be thankful you asked again.
Phase 5: Investigate Alternatives
So you have decided that there really is a problem that your purchase is going to solve. Before actually committing to acquire more stuff to solve the problem, look around your home. Maybe you already have something that can be used. Alternatively, maybe you can build something similar without having to go out and buy something brand new.
There are a couple of other benefits that you gain by reusing and/or building things instead of buying them. First, you are helping prevent some waste from making it into the landfills. Second, you are building up your problem solving skills and DIY skills. You already know the importance of having a side hustle, and maybe these new skills will give you the tools to start another one! I love building things myself when I can for these reasons and I also gain extreme satisfaction by being able to say, “I made that!”
Phase 6: Borrow It
Unfortunately, if you have made it here, then you either do not have an alternative, you can’t build a solution, or it is just too expensive to actually build something yourself. One final step to make before you actually checkout with your shopping cart full of goodies is to see if you can borrow what you need. If you are only going to watch that movie a couple of times, then ask a friend to borrow it instead or even rent the movie. When you do not actually need an item on an ongoing basis, then it will often make more financial sense just to borrow or rent it as needed. Just make sure you return it! Don’t be that person who borrows things and doesn’t return them, or the person paying tons of money in late fees.
Phase 7: Buy It
If you have decided that you truly need to make this purchase or determined that it is worth the time that you are spending to acquire it, you delayed the gratification, you searched for alternative solutions that you may already have, you looked into borrowing it, and you investigated building it, then go ahead and buy it. It is important to go through each of these steps not only to prevent yourself from making it to Phase 7, but also to make yourself more satisfied with your purchase when you actually make it. By making it through the entire process, you should know without a doubt that this purchase is worth it and you are going to be much happier with your new buy.
Phase 8: Track Your Spending
You may have made your purchase already, but you are still not done. Make sure that you are either writing down this expense into a log, or tracking it through a service such as Mint.com. Periodically make sure that you are reviewing all of your spending. This step is extremely important if you are not using a budget in tandem with this process. Over time, you run risk of lifestyle inflation if you do not pay attention to your spending drifting upwards. By reminding yourself of where your money went after going through this process, you give yourself some more reinforcement to stay the course.
How Do I Save Money?
How do I save money? I have ingrained this process into my mind and my daily life. By constantly going through this process, I stop myself long before making purchases, and I am much happier with the purchases I do end up making. I do combine this with monthly tracking using Mint in order to keep myself on track.
This process saves me far more money than budgeting actually does. Why? Because my budget is just a piece of paper used for planning. I do not pull it out and look at it when I get hit with the urge to buy a new bike. I follow this process instead and that is what helps me keep my spending down. Benjamin Franklin once said, “Beware of little expenses. A small leak will sink a great ship.” By using my process outlined above, I am able to avoid many of those little expenses that would add up. Ultimately, this allows me to put far more money into my 401K and help me gain the financial freedom to retire early.
How Do You Save Money?
What about you? What are some techniques that you use to save money on a frequent basis?
I don’t do it frequently enough, but I find I spend much less on groceries if I shop with cash. Using my debit card makes it too easy to buy items not on my shopping list.
Like you, we find tracking expenses key. We’re in our second year of logging every single expense, using Mr G’s tracker. It’s extremely helpful.
That is an excellent point on using cash. It is shown that we tend to spend less when we use cash than when we use a card ( soucre:http://www.apa.org/news/press/releases/2008/09/credit-cash.aspx). I have found this to be true in my own life for the most part. I am able to mitigate this when grocery shopping because I have gotten much better about sticking to my grocery list. One place that it does make a huge difference for me is when my wife and I go out to dinner every once in a while.
You are absolutely correct in what you stated above.
A long long time ago, I had no budget. Even without one, I made sure that I didn’t just spend. I always made sure that I ask myself if I truly need to buy a product or not. It’s so easy to get convinced to buy products that you don’t really need (thanks to endless marketing and advertisements that seem to convince you that this products are needs not wants).
In addition, I always checked whether I can find the same or similar product at a lower cost. I just don’t buy stuff because I need it. I always make time to research to make sure that I get the best price for a product.
Allan, it’s great to hear that you were able to ask yourself whether you truly needed a product or not. You are right, advertising makes it difficult even to the strongest-willed people at times to resist the urge to splurge. Shopping around definitely is something people should get in the habit of doing when it comes time to make a purchase. The internet has thankfully made such comparisons incredibly easy!
“I love to make budgets. Planning things out, making spreadsheets, executing my plan, then figuring out ways to make it better is probably more fun to me than for most people.” Kindred spirits, my friend!
I’m a firm believer that while a higher income is better, what you do with what you make is ultimately a more important factor – to achieving financial freedom – than what you make. And for me, the best way to do wise things with my money is to track and manage via a spending plan (aka budget for most folks).
I’m with you all the way James. A budget is still an incredibly powerful tool that all people serious about financial freedom should keep in their toolbelt. Along with the budget, they need the self-discipline to stick to it!
Stopping to think is crucial. Some people definitely have the “shiny penny” mentality where they see something and MUST have it. Doing some self reflection and noticing when this is the case is absolutely key to saving money.
Well said Frank Facts. Just taking that first step to think about what is happening is such an important step.
Larry, impulse buying is the doom of many peoples finances. Often times people buy items to please their “needs”, impress friends or to simply cure their craving. One method I have used to great effect when I want to buy something out of impulse is to put the item down and go home. Do some research online to see if I can get better prices and if one week from the day I wanted that item I still feel like I need it then I MIGHT buy it. What do you think about this?
Stefan, I think that this is an excellent strategy as well. It aligns nicely with my Phase 3: Delayed Gratification. To me, this is one of the most important things that people can do. There is a reason that Grocery stores put the items that are only a couple of dollars by the registers. Companies know how to exploit our impulses. By delaying gratification, we empower ourselves to fight back. Adding in the research bit is a nice touch as well. It helps you make sure you are purchasing at the lowest price if you still decide to purchase in a week.
I’m working with my neighbors to borrow each other’s tools and appliances if we really don’t use them very often. For instance, I have a Keurig and my neighbor had a gathering and was thinking about buying one for it. I told her to just buy the cups and use mine. They in return loan me all sort of tools when I need them. It actually fosters better relationships I feel.
That’s awesome that it is working so well for you! Tool swaps are awesome because a lot of things we only use from time to time. It is totally efficient to share with your neighbors. Plus as you said, you get the added bonus of better relationships as well! Thanks for sharing!