Does spending less than you earn come naturally to you…or do reading those words raise a guilt-flag in the back of your head?
You may spend when you're bored, when you want to reward your efforts, when you're feeling depressed, when you have a new date or an important upcoming event…
when, when, when…
For some people, every occasion is a legitimate opportunity to spend money. There may be remorse later when the bills come due and there's only $17.46 remaining in your bank account (5 days left before your next pay, no less). Or there may be no remorse at all but you have the sneaking suspicion that saving money for the future is something you should get around to.
(right after you check your credit report and before you settle in to shine up your baseboards).
If you're a “spender without a cause”, there are definitely some options to reign in your habit. You may think it odd at first, but many people give themselves physical restraints so that they will not use their debit/credit/cash.
You would be amazed at what people will not do because of one little extra obstacle.
A negative example of this: approximately 46% of Americans eligible to participate in their company’s 401(K) matching retirement plans do not participate due to the fact that they have to opt-in (which involves what amounts to a phone call and possibly a sit down with your HR person).
Physical restraints placed between you and your moolah might be just the thing to jump start your savings.
Physically Separate Yourself from Your Credit and Debit Cards
There are several ways you can physically separate yourself from your plastic. The first option is to put them into a plastic sealable bag, fill it with water, and put it in your freezer. You can also cut up your cards (but still keep the accounts open for credit history purposes or to continue to pay off debt), or you could open up a safety deposit box at the bank and put your cards in there.
Each of these methods gives you a cooling off period to really think about your purchase before you make it (figuratively, and literally, in the case of the ice block).
Purchase Penalty-Laced CD Savings
You likely have a few large expenses each year, such as property taxes, six month insurance bills (if you pay these all at once sometimes you save a few bucks), tuition, etc.
Do you ever get afraid you might spend the money before the bill is due, or that somehow it might just get absorbed in the no man's land between your checking and savings accounts? Purchase CDs in the amount of your planned, large expenses. Make sure they mature right before your bill is due. Not only will you earn a little bit of interest, but because there's a penalty to cash them out (not to mention you might have to travel to an actual brick-and-mortar bank) you're not as likely to touch that money.
Pay Too Much in Taxes
I would normally never recommend doing this, because when you pay too much in taxes, you are giving your money to the US government instead of it earning interest or otherwise working for you (you're welcome, Uncle Sam).
But we're talking about ways to physically restrain you from spending your money…and I can't think of a more effective method then involving the IRS.
Work with your HR professional to purposefully have them withhold more taxes than you should actually owe (typically you'll change your withholding on a W-4 tax form). It's pretty much forced savings. The trick here is that at the end of the year when you receive your tax refund, you need to immediately put this money into a savings account and forget about it—it’s not an extra lump sum that you can spend.
Use a Gift Card Allowance System
Have you seen those gift card kiosks popping up in everywhere from grocery stores to Home Depot? Pick yourself out several at stores you frequent (including the grocery store), and fund each with your budgeted money for that month.
You can either fund one gift card with all of the money for each of your categories of spending (such as a Visa or American Express gift card), or use one gift card per category, such as food, gas, and entertainment. When the gift card value is gone, so is the spending.
Note: this physical restraint might penalize you with an activation fee, so be prepared.
Put a Freeze on Your Credit
When you choose to freeze your credit, then each decision that is made to open up a new credit card or credit line, purchase a car, a home, etc. will entail a phone conversation to a representative at each of the three credit bureaus (Experian, TransUnion and Equifax). Talk about an inconvenience!
Un-link Your Credit Card Information to Online Stores
It is so much easier to just click “buy” online when you have your credit card information saved to your account and do not need to enter it all over again. By un-linking your credit cards and deleting the information, you are introducing one more physical barrier between you and whatever item you feel you need/want.
Do you use any sort of physical barriers to keep you from spending your money? I'd love to hear about them in the comments below (and you might help someone else out!).