The Things That You Control

I’ve had a lot of discussions with people who are trying to get a handle on their finances. Most are willing to make significant efforts to change the way they think about spending money, but there are two blind spots that people can have trouble getting around.

The first blind spot is a belief that none of the savings opportunities will work for them.

“Well I’m sure this would save lots of people money, but in my case…”

I can run though a huge list of things and they can respond that it’s just not possible for them because they’ve already looked at this and in their specific situation it’s just not going to help. They apply this to every suggestion and end up trying to convince me that there’s really nothing to be done.

The second blind spot is the set of purchases that your subconscious really wants, that it considers justified and deserved reward. Your mind guides you away from these areas and so you avoid thinking about them too much. Things like cigarettes and alcohol, but also chocolate bars and lattes on the way to work.

Here’s how to think about these savings opportunities…

It Won’t Work For Me

I get this a lot.

  • There’s really nowhere decent with any lower rents than where we currently live
  • It would cost me more to change car than to keep this one, despite the size of the payments, and we could never get by with a smaller car, just look at the size of the pram!
  • You don’t understand, the groceries around here are crazy expensive, our grocery bill may look massive, but there’s no way to reduce it by any significant amount

I don’t want to be harsh, but sometimes it’s the only way to break through to people who are in denial about how much they spend.

These are all things you can save money on.

The size of the pram is an excuse for a large car and is easy to change, car payments are often a major source of expense. Not wanting to change home is often more to do with the emotional difficulty of uprooting the family than any real constraint. Every single person who’s told me they can’t lower the cost of their groceries fails to plan their meals week-to-week, and they cringe when I go through their grocery bills. They also tend to throw out much more food than they like to admit, to themselves or to me.

One of the hardest things to do when trying to reduce your spending is to take a fresh look at each spending category. There’s nothing obvious about reducing your grocery spend. If it was obvious you’d already have done it. You need to root out the bad habits ingrained in your spending habits and deliberately counter them.

Take another look at that category and ask yourself, if my life depended on reducing this expenditure by 20%, how would I go about doing it?

I Don’t Really Want To

The alcohol / cigarette / small but expensive luxuries category is really dangerous. We indulge in these behaviors in large part because they are addictive. We tell ourselves they are pleasurable, but in this context, that’s what “addictive” means.

We smoke a cigarette and get a little hit of dopamine.

We sit in front of the TV watching a re-run of a TV series and drinking a bottle of wine, and we get another little rush of … dopamine.

Dopamine is the reward chemical, which trains our brains to do the same thing again, like a lab rat pushing a little lever to get another hit of sugar water, getting the same vacuous reward because it’s untethered to the real world. That little bit of pleasure doesn’t come from achievement, it comes from a chemical reaction in the brain, it’s pleasure without effort, addictive and pointless.

Here’s a question: You’re trying to take control of your finances, which is a complex, slippery beast made up of constraints and bad habits. To successfully turn your financial situation around you’re going to have to change all sorts of behaviors. How can you possibly hope to do that if you can’t even control a really basic impulse like buying a pack of cigarettes or a bottle of wine and doing something that is known to be a net negative on your productivity, your concentration and your health?

You can’t.

If you can’t stop drinking for a month, if you can’t quit cigarettes, and you’re in debt and shouldn’t be spending money on these things in the first place, then you haven’t a hope of making the more subtle changes that a true reversal of your financial situation requires.

Get a grip.

Here’s what you do:

For one month, you stop spending any money on alcohol or cigarettes. Don’t go cold turkey, you have a bottle of wine and a half-pack of smokes left somewhere, so you’ll have to manage consumption for a while, but from the first to the last day of next month, you don’t spend a single penny on these vices, just consume what stock you have.

While you’re not buying them, you should measure what it saves you. How many bottles of wine did you buy last month? How many cigarettes?

If you’re budgeting you might consider splitting those out into a separate budget and reporting line called “Vices”, so you have real transparency about what they cost you. You should do this with all your financially-measurable bad habits.

Even if the number is not huge, this is something that you can objectively cut off completely with only positive consequences.

Put it on your blog, write it on your Facebook page: “Dear Friends, for the month of XXX, I will not be consuming alcohol, please don’t offer me any. Thank you!”

Not only will your wallet thank you, but you’ll sleep better, concentrate more easily, have more energy and give your liver a much-needed break.

PS. If you neither smoke nor drink, then congratulations, this doesn’t apply to you! Now stop eating chocolate, or drinking take-away coffee, or having dessert at every meal. Whatever your indulgence is, tackle it. You can reintroduce small vices in extreme moderation at a later date. For now, save the money.