Whether you want to supercharge your savings or you want to increase your sales, changing the frame of reference to your advantage is a powerful technique. Using the re-framing method, you can remain resolute in your savings goal and resist all calls for you to spend frivolously.
- Multiply the time-frame – Say that you are tempted to eat lunch out instead of that tasty sandwich you brought from home. Consider that $10 lunch would cost you over $43 in retirement if you got only 5% over the next 30 years. Would you pay $43 for that mediocre lunch out at the local Chinese restaurant?
- Re-frame which bucket the spending occurs in – If the cost of that new dress and handbag comes out of your “savings for a trip to Italy” spending bucket instead of the “clothes” bucket, you may be a little slower with the credit card. Thinking about giving up something much bigger and more important can help with the decision analysis.
- Re-frame the feelings from positive to negative – If you change the frame of reference on your prospective new TV purchase from the good feelings of a new electronic toy to the negative feelings of spending so much money for a TV only somewhat better than the one you have now, you can keep yourself convinced to save your money, or at least have enough patients to wait for the best deal and negotiate from a position of strength.
- Re-frame a gain as a loss – Research into the stock market shows that people feel the pain of a loss 4 times greater than they feel joy from a gain. Like the note above, you need to focus on what you’re losing. In this case focus on the lose of money in exchange for the fleeting gain of your new purchase.
- Re-frame by changing the units – Changing the cost of something into another unit, such as time can help overcome your desire for wasting money. Someone wanting to buy a pair of diamond earrings for $1,500 who makes $10 an hour needs to work for a full month (before taxes and any other expenses) in order to afford it.
- Re-frame the frequency – Many corporate buyers know that the cost of a new enterprise product isn’t so much the purchase price, but the ongoing support costs. Take heed, and remember that if you really want that new puppy, you’re not just spending $50 to adopt him, but will have ongoing costs to feed him, ongoing time commitments to walk him, and ongoing problems with indoor puddles.
- Re-frame the bundle – You can’t go out to dinner today because you ate out last week. Expanding the bundle of “eat out” to an entire month can really cut down on the costs. Similarly, you can’t afford that new cell phone plan because you already get cable, internet, and your utilities. This expands the “utilities” or “recurring home costs” bundles.
- Re-framing Combo – Use two or more of the above re-framing techniques together. Instead of thinking about all the wonderful time you’ll spend on that brand new carpet you want to install, think of the loss of freedom (gain into a loss) because you used part of your emergency fund (re-framing the mental accounting buckets) that will take you five whole weeks of work (after taxes) to replenish (changing units).
As pointed out in the comments, I do think that you need to apply some moderation to the saving money & frugality process. See my article on the WAVE saving method to saving in cycles and then reward yourself.
Readers, do you have any tips or tricks that you use to justify your spending either to yourself or others? What about keeping yourself on the straight and narrow and keeping that wallet in your pocket?
Karl Nygard is the original founder of Cult of Money and created the website to share his ideas on investing, personal finance, and more.