Tip #152 - Decrease Your Wants. In an effort to save money or get out of debt, you need to either increase your income or decrease your outgo. While increasing your income is a viable way to build wealth, many people just end up getting accustomed to their new income and spend the extra money they earn, without actually saving more or pulling themselves out of debt. We can talk about that in another post. Instead let's focus on decreasing your spending. As part of lowering what you spend, I recommend creating a budget, buying used, and calculating your cost per unit, among other things. But sometimes just cutting down on our usual expenses isn't enough. Sometimes we need to change our mindset as well.
If you are only trying to sail through a debt reduction plan or a build your wealth plan by living life as you have always lived it with slight modifications, you may not succeed. If you are eating rice and beans counting the days until you can eat steak again, you may not meet all of your financial goals. Depending on how far in debt you are or how much you need to build up your savings, you may need to dramatically change your expenses. While some fixed expenses may be more difficult to change - such as your housing and transportation expenses - discretionary spending, also known as your "wants" should be easier to change. These are things such as your eating out, entertainment, hobby, and other "fun" expenses. If you think you can cut down on buying two pair of shoes per month just until you have your debts paid off or if you think you can forgo one of your bi-monthly manicure appointments until you have money put away for your son's college, you may fail in your desire to save money or get out of debt.
Part of drastically reducing your debt or radically increasing your savings is changing your lifestyle by decreasing your wants so that you aren't putting a temporary fix (for example, eating rice and beans for six months until you get back on your feet), on a long-term problem (having champagne tastes on beer budget, as the saying goes). In order to increase your wealth, a big change in your wants for the long-term is necessary. You need to embrace major changes in your spending habits in order to succeed in your financial goals.
In Real Life (IRL) - One of my purposes of doing my weekly financial wrap-up is to be accountable to myself and my family. I'm sure most people don't care how much I spend at the supermarket or whether I paid $8 for a t-shirt for my daughter's school. But by doing a weekly diary of our expenses, it gives me a good sense of where our extra money is going. If other people do a similar exercise, I think they will come to the same conclusion. When other people look at our spending, I am sure that many think we don't spend very much. And I would have to agree. In the 2 1/2 months that I've been writing out our expenses, I have confirmed to myself that I am just not a big spender. I guess I don't have many wants, which is probably how I've been able to build up a large amount of savings.
Other people I know who are not saving much money or are in debt seem to have many wants - they buy clothes that are designers. They want fancy cars or cleaning help (okay, I'll admit I want that too!). But the main reason they are not saving money is because they have too many wants for their income. Creating a budget, cutting coupons, and comparing costs will help them reduce their spending. But until they change their mindset on what things they really want to spend their money on, I think many people will fail to reach their financial goals -whether it be to get out of debt or increase their wealth.