Sunday, December 14, 2008

Blue's Counter-Intuitive Budget Tips

I like to read "frugality blogs" in the way that some people like to read beauty magazines; a guilty pleasure, combined with the hope that one of these blogs will have the magic secret to saving all the money in the world.

But, like the-person-who-wasn't-Kurt-Vonnegut who said "Don't read beauty magazines/they will only make you feel ugly," sometimes reading those blogs is a bit "this guy says he NEVER eats at a restaurant; oh noes I went to Hello Cupcake today I AM SO PROFLIGATE..."

And then there are the "frugality tips," which always start with "bring your lunch to work every day" and end somewhere around "turn down the heat, wear lots of sweaters, and line-dry your underwear across your living room so you don't have to pay for the dryer."

But two of the more-common frugality tips ended up causing me to spend more money (or, actually, to spend the same amount of money but in less effective ways). Here's why:

1. Don't use debit cards; only use cash.

The frugality blogs say to use cash instead of debit cards because "when you're out of cash, you have to stop spending." They also say that it "hurts" more to hand over cash than to swipe a card.

I find that the only thing that "hurts" about having cash is the heaviness of the change. Otherwise cash tends to fly out of my fingers. When I swipe a debit card I know that transaction is going to be written down in three different places: in the small "ledger" that I keep in my purse (so I can remember what I spent money on), in my monthly "items by category" budget, and in my long-term cash-flow budget. Cash, on the other hand, is money that my brain views as already spent. It's money I've already pulled from the ATM, which I'm not going to be able to shove back in there. Might as well hand it to someone before I lose it!

2. Use the "envelope method."

The "envelope method" is a variation on the "spend cash only" idea; essentially it boils down to "at the beginning of the week, put the amount of money you wish to spend on restaurants/entertainment/whatever into an envelope; when the envelope is empty, stop spending."

It took me a little over a month to figure out why this method wasn't working for me. With the envelope method, I found myself spending more and feeling less satisfied with my purchases.

Then it hit me. The envelope method was the financial equivalent of counting calories (which I also did, for about two weeks, until I decided this garbage is F**KING WITH MY BRAIN and I am NOT going down the slow road to an eating disorder).

When one counts calories, it doesn't matter what one eats as long as it fits underneath the magic number; and if one goes over the magic number, time for the brain to whip out the cudgel. The same, I found, with the ridiculous "envelope method;" because my brain had flipped around from a state of "buy what you need" to "buy what fits within this arbitrary dollar amount," I spent up to the dollar amount; and if I spent exactly the dollar amount and then something unexpected happened, like running out of laundry detergent a few days earlier than planned, out came the cudgel.

Part of the reason, I think, that these tips didn't work for me is because I began with different starting conditions than the majority of these frugal bloggers; the people who blog about frugality tend to have life stories like "I used to buy seventeen lattes and sixty-six new pairs of shoes a week, and now I have to train myself to spend only what is in my envelope."

My money story is a little bit different. I've always had to think, seriously, about what I wanted before I bought it; starting from when I was a kid and got an allowance of $4 per week and saved it up every month so at the end of the month I could buy a single cassette tape from the music store. I've never gone to the grocery store without a list. While I enjoy some kinds of shopping (yay Farmers' Market) I don't view shopping as something to do "for entertainment."

So, at the end of a long and admittedly self-indulgent post, here comes the real question: now that I am earning enough money to begin to use it to plan for the future, how can I re-train my brain so that it doesn't always think, when I'm making a purchase, "but you might need that $20 for something else more important -- and if you don't need it today, you'll definitely need it for retirement!"

I realized today that if I do make my goal of saving two months' living expenses by the end of the year (and it will be close), I'll have saved two-fifths of everything I've earned since I started my job. That seems more than admirable.

So why am I always reading frugality blogs and looking for ways to save more?


The Director said...

My rule is that if it's over $50, I have to wait one day for every $50 over that that it is. So if it's $100, I wait two days,if it's $200,I wait four days, etc.

If I still want it that badly after the wait period, then I'll probably get it.

I have a hard time spending money on anything but food, though.

Blue said...

LOL I waited nearly TWO MONTHS before buying Annotated P&P because I wanted to make sure that I really wanted to own it. A $16.00 book!

Well worth it, btw. ^__^

ctrlalteredmind said...

considering that a lot of people now have credit cards that offer between 1% and 5% cash back on purchases, it might be actually more expensive to buy something with cash instead of credit. I don't have such a card myself, but I should start looking into the details of getting one. plus, most of my 'big-ticket' purchases (apart from groceries) are done online, where cash is not an option. Oh, and I would love not heaving change in my pockets all the time.