Thursday, July 9, 2009

Harnessing your Mental Spending

Chained Wallet I am as guilty of it as anyone. I think to myself: “When I get my tax return I am going to spend it on a brand new (insert favorite item here).”

For some reason I find myself doing this time and time again. Fortunately, I typically don’t go spend that money before I have it, call it discipline or just the fact that I know better. For millions of people this is where their savings pilgrimage fails and in some cases where their debt habits take off.

It is so easy to spend the extra money you might have coming in before you actually receive it.  Our culture is truly based on instant gratification, after all that’s why the credit card was invented, have something now – pay for it later. Don’t become a victim to self rationalizing credit card spending. If you find yourself justifying credit card spending because '”I will pay it off as soon as I get that bonus”, put the item down and walk away. 

This is a great place to put in a plug for a tool that is near and dear to my heart: The Emergency Fund. If you are saying: “Andrew, the things I am using my credit card for are essential items that I cannot live without.” You need an emergency fund. I will not go so far as to say that credit cards are evil or that you should never have a credit card but if you do not have an emergency fund, you have no business using a credit card. 

If you do not have an Emergency Fund, drop what you are doing and call me to set up a time to put together a plan to get one. 402-938-6800

Money in Hand

If you are embarking on a savings pilgrimage, the quickest way to failure is to start mentally spending the money you are saving. One of my secrets to saving success is to “spend” my savings by investing it in an account that is very difficult for me to reach. If I send my savings to a Roth IRA, 401(k), investment club or credit union CD; I spent it. At first it might seem like this tactic would not work but once the savings has left my easily accessible checking or savings account – it’s gone. It works because I can’t spend it again. 

What are some ways that you have harnessed your mental spending to succeed in your savings pilgrimage? I would love to hear your tactics!

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