So this post probably isn’t going to help you save up a big drug dealer style roll of $100s like the image might indicate, but I can promise you that if you try out the simple personal finance training in this post you will experience a very positive gain in your disposable income, which in turn you can spend, save, donate, or do whatever you want with it.
For some reason nearly everyone I know is in the following situation.
They don’t have as much money as they’d like to. They don’t have enough fun in their daily lives, and they have too much stuff piling up around the house.
The lessons in this post take a page out of the playbook of the minimalism world, which very much interrelate with the world of personal finance. Basically what I’m going to be teaching you how to do is solve or alleviate many of the root causes of these problems that the vast majority of people in this country suffer from.
These techniques will help you:
- Minimize a good chunk of useless spending
- Maximize a good chunk of spending on the things you’d really like to spend money on
- Cut down on your accumulation of junk
It sounds like a simple solution on the surface. Buy less stuff, right? But there’s a problem…
If you lived in a bubble by yourself you wouldn’t have to worry about this. You could do whatever you wanted with your money and no one would ever know the difference.
But when you live like most people do there exists a paradigm of irrational consumer spending that goes on in this country and all over the world related to events that happen throughout the year. On many specific days throughout the year people feel it necessary to buy gifts for other people.
Why? Because that’s just what you do on holidays, birthdays, etc. It’s the socially acceptable norm in society. If you don’t buy gifts for people you’re considered an asshole.
That’s the problem.
You see, it’s not only you that are in control of the amount of stuff you accumulate, and the amount of disposable income you have to spend. There are others involved as well – typically your close family members and friends.
And the problem goes both ways.
You buy gifts for people and in turn have less income. People buy gifts for you and have less income. You each accumulate more stuff you probably didn’t want or need in the first place.
This results in an obvious decrease in disposable income for recreation, as well as an accumulation of stuff neither party wanted or needed in the first place.
If you think I’m crazy, just think of all the times you had to think really hard to figure out a gift you wanted for your birthday, then ended up just thinking of something that would be nice to have, but you probably wouldn’t have bought it for yourself.
All of that stuff is probably what ended up on Ebay, Craigslist, in your last yard sale, in your spare bedroom, or even worse – in the trash (gasp)!
And just think of all of the holidays and events there are throughout the year when people may deem it appropriate to buy you a gift.
- Valentines Day
- Mother’s and Father’s Day
You see my point? That’s a lot of money being spent on a lot of stuff, just because it’s the status quo.
It doesn’t have to be this way.
I’ve actually started doing this in my own life, and am in the process of attempting to train my family and friends to do the same (which is part of the reason for this post).
Instead of doing the whole gift giving thing on holidays and special events throughout the year, the money that would otherwise be spent on gifts goes into a savings account. That way it’s not spent on random stuff. Additionally, when family members ask me what I want for a given holiday, I ask for cold hard cash, and explain that I’m saving up to take a nice vacation (which is totally true).
Your reason to save can be whatever you want. Maybe you want to build a home theater room. Maybe you’d like to fix up your backyard. Maybe you’d like to see the world. What’s your reason? Take a few seconds to think about it. What’s something you really want, but don’t have the money for? My bet is that you probably already know.
Now whatever that goal is – dedicate a savings account to it. Pick something that will provide you with a lot of enjoyment you wouldn’t otherwise have. Think big. Think life enrichment.
Of course you don’t have to completely eliminate gift giving altogether, but at least try to dramatically minimize what you do spend, and put the rest back towards a goal of some sort.
The end result will be more money to spend on the things you really enjoy, and a steady decline in your rate of stuff accumulation – which has many benefits in and of itself – but that’s another post all together.
The important thing to keep in mind here is that this doesn’t just benefit you. It benefits EVERYONE involved. The more, the merrier.
The Numbers (So Far)
I’ve been attempting to implement this technique for about 4 months now. It’s going ok, but I don’t yet have everyone I’d like to involve trained. You’d be freaking amazed at how difficult it is to convince people to not buy you gifts. Crazy isn’t it?!?
Anyway, between only two birthdays and a period of four months not including Valentine’s Day, Easter, or Christmas (the heavy hitters), the lady and I (who was resistant at first but is now starting to come around now that she sees a vacation in her near future) have already put back about $650 into our vacation account, which is about a quarter of the way to a nice vacation for many folks (on top of what you already save).
Additionally, I’ve noticed at least a slight decline in the seemingly exponential rate of crap accumulation in our house – although there is still some work to do in that department.
The holiday season will be the big tester. I’m hoping we can get more people on board for that so this change can begin benefiting others as well.
Step by Step Action Summary
To get this in motion is pretty simple, but you have to take the necessary steps to make it a reality. Here is an action guide to get you started.
Choose a Savings Goal – This technique won’t work unless you are saving for a specific reason. You will just end up spending all of the money you put back on something random. Saving towards a specific goal will psychologically commit you to spending the money you save on that goal and that goal only.
Set Up Your Savings Account and Necessary Transfer Methods – Set up an account or a sub-account (available at many banks) for specifically this reason. If your bank gives you the option to assign a nickname to your account, name the account accordingly.
For example, the account I set up for our goal is called “Vacation.”
You’ll also want to make sure you can easily deposit money into this account when the time comes around to do so. Otherwise you’ll see it as a “chore” and you won’t do it. Set up a method where you can easily transfer money into this account
Power Tip – Don’t make it easy to transfer money out of this account. You only want to take money out of this account in big chunks, when it’s necessary to spend for your goal. If you get an ATM card, put it away, and don’t connect to to transfer to any of your outside account except the one you absolutely need it to connect to.
This is done most easily with online banks. ING Direct is a great one. Their savings accounts are very nice, and even pay a decent chunk of interest (for a savings account that is).
Talk With Your Family and Significant Others – This technique won’t work without buy in from your significant other and immediate family members (those most likely to participate in gift giving).
Sit down with them, discuss your reasoning, and come to an agreement with them. This may be difficult at first because people are just so hard-wired to give gifts, but just keep at it. Let them know how important it is to you.
Even if the whole family doesn’t buy-in, at least get your significant other to buy in. You can at least do this with your own situation and the benefits will be fairly nice.
Choose a Dollar Amount Per Holiday / Event – What is a birthday usually worth? What is Christmas usually worth. Anniversaries, Easter, Valentine’s Day, etc?
Maybe some are worth more than others. Maybe they’re all worth the same. Either way, agree upon a certain amount you will contribute per holiday and stick to that. Between all of the reasons there are throughout the year to gift give – you’ll be able to easily save thousands even if it’s just an agreement between two people.
Execute – Now that you’ve got the building blocks in place, it’s up to you to execute your plan. Every time a gift occasion comes around, contribute this money to your savings account. Even if you still give a tiny gift to keep the gift giving spirit alive, your main task is to save for that ultimate goal. Put back good chunks of change into this account and watch it grow over time.
Try as hard as you can to get family members on board. The more people you get on board, the better the rewards will be, not just for you, but for everyone involved.
Reinforce and Repeat – At some point your family members may forget about your goals, or you may take your vacation, build your home theater room, or buy your boat. I sincerely hope you do.
But when you do reach that goal, don’t let that be the end of it. Reinforce to your family members that this was a great decision for you and that you’d like to continue your radical ways. Keep saving, and save even bigger.
Take more trips. Buy more big ticket items that you really want. Accumulate even less “stuff.”
Live a better life. I hope to, and I hope you do too.
Please Help Evolve This Technique
Lastly, I would like to hear your feedback on this technique. It’s something I just started doing myself and I haven’t yet worked out all of the bugs. If you feel that it will be beneficial to you please let me know. Also, if you see any holes or drawbacks let’s discuss those.
Every situation is different and one of the goals of this post is to find a solution that is adaptable for anyone.
Please comment below!