It’s that time again! The end of the year (in fact the end of the decade!) is upon us, and a lot of us are starting to set goals for the upcoming year. For many people, those goals involve being more controlled and conscious about spending in 2020.
You may be setting a budget, trying to stick to a spending plan or just watching your money more carefully, but the goal is the same. You want to become more intentional about your money so you can buy and spend on things that you want. Whether you make $50,000 or $500,000, a more conscious approach to spending can only benefit you in the long run.
But how do we establish a new mindset in a way that will last? Today, I’ll cover three habits that will help you stick with your 2020 budget. These habits assume that you’ve already done the preliminary work of figuring out your why and what you want your money to do for you. If you haven’t done that, start here and then come back.
Switch to cash/debit card
Studies show that we spend more with credit cards than we do with cash—up to 83% more in some cases. That means when you use your credit card, you’re willing to pay $183 for something that you would only pay $100 for in cash.
Why in the world would we do that? It’s all about behavior science. Spending on a credit card takes away the immediate awareness and pain of how much something costs. It’s the whole concept of buy now and pay later. You spend now and don’t get the bill until next month. This way you don’t have to think about whether you can actually afford the thing.
When you spend cash, you have to keep track of how much you actually have to spend. If you only have $100 on you or in your checking account, you know you can’t actually pay $183 for those tickets. That immediate awareness keeps you conscious of how much you’re spending and whether that item/experience is worth the money you’re about to lose.
I’m not saying you have to carry a bunch of cash around with you (you can if you’d like though). You can achieve a similar effect by using a debit card. You can also continue to use your credit card but write down every purchase. This can get a little cumbersome (will you really stick with this?), but it’s a way to spend on your cards and also keep your heightened awareness. Either way, once that money gets low at the end of the month, you’ll automatically be aware of how much you have left to spend.
I can already hear you asking, “But Brian, what about my points?!” I get it. I love upgrades, buying trips or getting hotel rooms for “free” because of points, too. But take a step back and ask yourself why the points game exists. Credit card companies don’t just want to give us free stuff. They hire plenty of behavior scientists that know we will spend more on the cards with this additional incentive. When you spend $1 unnecessarily to save $.02, you’re still behind by $.98. You’re much better off just saving that $1 and using it for something that actually brings more fulfillment to your life. Also keep in mind you don’t have to do this permanently. You can try it out for a month or two to get in tune with your spending. See how it changes your awareness and attitudes.