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.
While many of these re-framing techniques can help us remember the larger consequences of our spending we should also remember to pat ourselves on the back when we choose to stick to our savings plan instead of just focusing on how spending can be a negative. I find myself staying more motivated when I acknowledge my saving successes.
I agree completely that we need to celebrate the successes, but these techniques are primarily to help you resist temptation when it occurs. When you succeed at resisting spending, you should then definitely give yourself a big pat on the back!
This is a great post about barriers. I use the “which bucket the spending occurs in” to help me not be so impulsive.
This is interesting, and some of these are really great tips, but others of them seem…well, unnecessarily negative, I guess, from two perspectives.
I’m generally a “saver” by habit, but when I decide to break the mold and buy something I really want and have planned and saved for but do not need, I don’t need to make myself feel bad about it. Frugality is in my opinion about saving money in some places so that you can better use it in areas you care more about, whether you really care about local free range food or great coffee or world travel or retiring early. I already have trouble breaking out of the “but what if the worst happens and my emergency fund is not enough and this new x would have made the difference” mold when I really, really, really want and have planned for something, without piling all this “spending is bad, don’t think about good, think about bad” on top of it. It’s all well and good to say “well, that thing you want and have planned is different”, but habitual thought patterns are hard to break, guilt especially. I find that if I let myself entertain these sorts of thought patterns–let alone consciously enforce them!–I find it even harder to enjoy the things I want to enjoy. Instead I just feel guilty about them too, which is the opposite of the point. I want to enjoy something I spent time and effort saving up for, but conscious negativity creeps into and subverts that.
From another perspective, some of my friends are very much “spenders”. I’ve helped a few out with their finances, and the overwhelming “sticking point” with them in terms of budgets and ways to think about saving is that when they think about spending in such a negative fashion, and characterize everything they consider buying as a negative and try to feel bad about the prospect, it basically just builds up on them until they feel restricted and repressed and finally they just want to buy something, anything at all. This often results in an outpouring of unplanned spending on something (or somethings) totally frivolous, even more frivolous than a new blouse they’ll actually wear or a latte they’ll actually enjoy. This is in part an issue of self-control, but the fact is that no one’s self control is perfect (and some research suggests that self-control is in many ways a resource that can be exhausted), and for people for whom spending usually brings a rush of good feelings, piling negativity on top of it can sometimes lead to a “snap”.
Don’t get me wrong; I like a lot of your techniques, especially the one about reframing the volume ($4 now, $40 in retirement) or time/goals (do I value this more than getting to go on my trip sooner?), as well as thinking about the bundled and recurring costs. But I think purposely piling negativity into an area that’s already fraught with either feelings of guilt or repression for a lot of people can be counterproductive.
Cass, I very much agree with you that you should in fact allow yourself to enjoy spending money in the areas you are truly devoted to. I also think that combining these techniques with some type of reward is important. You need to make the lizard portion of your brain feel good about saving money. See the addendum at the end of the post that I added. Great comments! Thanks so much for posting your opinion!
I think this is a good idea, but it only works as well as the person who is using the technique. I’m not sure this one would work for me. I’m the type that loves to spend money as soon as I get it. Even if I know what the “big picture” is, I find it hard to resist the urge to spend. It’s somewhat sickening, actually. But, for the right person, this technique will work wonders.
Yes, that is the downfall of any system, the actual users. I think that using some of these techniques can certainly help you reduce your spending if that is what you want to do, but of course it is simply another tool. If you’re not interested, in accomplishing the goal, nothing outside can motivate you enough for lasting change.
THANK YOU! I needed to read this. I need to get my savings to the next level, and just thinking about the losses in all these different ways will really help get my butt in gear.