Sep 132015

Imagine that instead of buying that expensive thing that you can probably live without, you took your money and invested it instead. Depending on your age and investment skills I’d say over a lifetime that money could easily triple. For example:

$10 invested for 25 years at 7% return = (10*1.07^25) = $54.27

Which in today’s dollars is $36.81. Lets round it down to a conservative $30.

This means that a dollar saved today will became three dollars in 25 years with proper investing. This isn’t anything new, we all realize that compound interest multiplies your cash like rabbits. So I’m going to draw the opposite parallel. Spending money is like murdering those rabbits. Not only do you murder that rabbit, but you murder all future offspring of said rabbit. This is the part most people choose to ignore (the spending part, not rabbit murdering. I don’t condone murdering rabbits unless you are really hungry). Every spent dollar is one that can’t be put to work making more dollars.

Only one thing on it's mind...

Only one thing on its mind…

Lately I’ve used this mental trick to help reduce my spending. Ask yourself this question next time you consider buying something frivolous:

Would I still buy this if it costed 3x more?

Because ultimately it will cost you three times more that the price that you pay. It’s true based on my earlier assumptions.

For sure you’ll often answer yes. You need food to live and clothes to be decent. But the question is meant to start shifting your inner attitudes toward frugality. Anyone can make a budget and deny themselves financial pleasures in the short term, but just like hardcore diets, most mortals can only eat so many carrots before breaking down and eating a whole cake. The key is to change your intrinsic motivations to the point that you don’t want to spend the money or eat the cake. The more you practice acting for the long term, the more pleasure you’ll reap in the present from favoring that long term financial and/or physical health. You will live the majority of your life in the future. Make it the best you can!

Screw that, I’m going to live in the present and enjoy my money today!

I’m not saying you should save everything, you aren’t a hoarder, and we all need to make the most of life in case earth is hit with a gamma ray burst tomorrow. There are just so many places where you can get virtually the same result while paying less money. Some examples include:

  • Buying store brand instead of name brand products
  • Buying delicious and safe GMOs instead of organic
  • Walking or biking instead of driving
  • Waiting to see a movie in discount theatres, on a matinee, or Tuesday instead of paying full price
  • Making coffee at home instead of buying it at <expensive coffee chain>
  • Buying a three year old car instead of a brand new one

These are all simple acts that don’t require a dedicated budget. Once you develop this internal sense of frugality you’ll start seeking new ways to cut back on spending and your reward will be the satisfaction of knowing you’re closer to your financial goal, whatever that may be.

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