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Convince yourself to rein in spending

Grab hold of your goals by tricking mind to save

By Betty Lin-Fisher
Beacon Journal business writer

Published on Sunday, Jun 22, 2008

It seems like the best way to jump into this financial challenge of ours is to get our minds around the ultimate goal — managing our money.

But it's not so easy to reduce our spending, or even save money. It's much easier to spend. Saving money can be painful and can mean some sacrifices or justifications of our spending.

So how do we psychologically get ready for this challenge? How do we essentially ''trick'' our minds into agreeing that it's good to save?

When I posed this question to some psychologists, I likened it to a diet. How do you stay on a diet when all you really want to do is eat sweets and fatty foods? Is it as simple as trying to remember that short-term pain is rewarded with long-term gain?

Stuart Vyse, a psychology professor at Connecticut College and author of Going Broke: Why Americans Can't Hold on to Their Money, said our collective financial problems are not really because we have no willpower, but because we live in a world where it's so easy to get separated from our money.

''When I was a college student in the 1970s, when you went home, you were pretty much out of the marketplace. You couldn't be separated from your money. You had to go to the marketplace to spend,'' he said in a recent interview. ''With the introduction of 800 telephone numbers, the Internet, home shopping and much more pervasive advertising and branding,'' it's only when we're asleep that we're truly free from constant opportunities to spend, he said.

''We live in a society that's built on spending. The patriotic thing to do is to go out and spend,'' said Vyse, whose research specialty is irrational behavior. ''You hear very little about saving and how important that is. This should be a national goal. There needs to be much more emphasis on holding on to your money and putting it away — the joy of having money in the bank.''

Part of the trick of convincing your mind to save is to really understand what motivates you and your spending, said Joshua Coleman, a senior fellow with the Council on Contemporary Families, a group of family scholars and practitioners. Coleman is also a private-practice psychologist in the San Francisco Bay area and author whose specialty is couples and families.

''We live in a highly consumer culture where people are constantly told that if they don't have the latest, greatest thing, something is wrong with them,'' said Coleman, a Dayton native whose newest book is When Parents Hurt, Compassionate Strategies When You and Your Grown Child Don't Get Along.

''Look at the way you're being manipulated by consumer culture and see yourself in battle with that,'' said Coleman. ''Realize you're being hoodwinked by the consumer culture. If you don't have these things, you're less adequate, less developed. Many parents are vulnerable that they're not a good parent if their kids don't have what their peers have.

''Part of what people have to work against is their own shame or feelings of inadequacy of not having those things,'' he said.

For instance, Coleman said many adults need to come to terms with, and understand, their upbringing and how that might be affecting how they spend as an adult.

''For many people who grew up with deprivation and their parents didn't have money, spending is somewhat convincing themselves they won't be like their parents, to remind themselves, 'You're not as poor as your family was.' Sometimes people can spend themselves into poverty from trying to defend against those feelings,'' said Coleman.

Start saving

Here are some tips for us for our challenge from some experts.

• Make the saving invisible and painless.

If you get an annual raise, take some percentage of that raise or all of that raise and immediately designate it into a savings account, said Vyse.

''You avoid the pain of having to adjust with less money. You're just going along as you have and suddenly more money is going into your savings account without you sensing pain,'' he said. ''We hate the immediate loss of money. That's why credit cards are this wonderful thing. You put off pain until the future. You get the thing now and you pay later.''

If you've recently paid off a car loan or no longer have a regular payment toward a service, deposit that installment into a savings account, said Jay Seaton, area president of the Consumer Credit Counseling Service of Northeastern Ohio.

''Trick the mind,'' said Seaton. ''I don't care if it's an automatic direct deposit and goes to a checking or savings account every month, or it's $50 or $100.''

You don't have to take the whole payment and put it aside. Take some and reward yourself and take some and save it. ''The magic, even if at 1, 2, or 3 percent (interest) for a 10- to 20-year period, with compounding, that's one of the keys to this — using time (to build your savings),'' Seaton said.

• Set up a separate account for paying bills.

Vyse suggests a separate checking account from which all bills are automatically paid. Increase the amount in the account for holiday shopping or special purchases.

''By setting up a separate checking account into which those automatic payments and major expenses come from, that becomes this invisible bill-paying account. What you're left with is an account with an ATM card and that is your true disposable income,'' Vyse said.

Vyse argues that looking at the checking-account balance before paying the bills can be misleading.

''If you have a lot of money coming in and you have to pay the bills, it's deceiving. It's all spent,'' he said.

Your money left over after bill-paying will be your ''discretionary money.'' The majority of middle-class consumers have discretionary money.

People don't have to become monks or deny themselves all rewards or pleasures by not spending money, said Vyse.

''Look, the world is set up so it's easy to spend. It's hard not to let the money go through your fingers. Try to make it so saving is just as easy,'' he said.

By segregating the discretionary money into one account, your willpower is exerted over a much smaller sum.

''Place the willpower in what's left over,'' he said. ''It's that little part of your world where you do have control.''

In his book, Vyse said the bill-paying account and discretionary account ''may seem like a bit of game playing, an attempt to trick yourself into prudent financial management, but the goal of these strategies is to take the important decisions off the table and make staying within your budget much easier to do.

''Eventually the 'trick' will become a habit. In addition, if you use automatic saving as a commitment device, then savings will be the default option,'' he said.

• Think of a way to reward yourself.

Make a specific goal for your savings, said Coleman. ''What's the pot of gold at the end for you? It may not be enough to say you're going to save for the future. That may be too far and too vague. If you make it very specific to what you want, like, 'In the future, I will have savings for whatever,' that could be much more motivating.''

• Take away the temptations.

''Throw away the catalogs that come in the mail. Don't watch TV shows that focus on fixing up your house,'' suggests Kent State University Associate Professor of Sociology Susan Roxburgh, a specialist in work, family and mental health. ''All of these things give us opportunity to focus on what we don't have. Looking in the catalog generates needs you didn't even know you had. That's the purpose of it.

''If we recognize that everybody is influenced by those signals, the only way to do it is to turn that signal off and your attention turns to other things. You're less likely to notice the things you lack,'' she said.

• Realize that some things you'll give up will feel like a loss to you and learn how to deal with it.

''We have to treat these things as though they're addictions,'' said Coleman. ''When you're in the midst of them, they feel very compelling. You feel like you can't live without them. But what people realized is when we give up these things, we create space for something different to come in.''

For instance, if you give up your cable TV or reduce the number of channels, you're not only saving money, but also you'll be saving time to do something else creative, Coleman said. ''Don't see it as a take-away. See it as a way toward your growth and development.''

 

Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com.

 

It seems like the best way to jump into this financial challenge of ours is to get our minds around the ultimate goal — managing our money.

Get the full article here.


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