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Trick Yourself To Save Money

by retirebyforty on December 12, 2011 · 43 comments

in real estate, saving tips

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trick yourself to save

Hidden ball trick.

It’s the holiday season and this month can be a difficult one to continue our saving habit. Sometime we need to trick our minds to maximize our potential. Here is one trick I use to reduce spending and increase saving.

For many of us, it is easier to save money if there is a solid goal to shoot for. Saving money for the sake of a larger bank account is difficult to do and it’s not fun at all. For many of us, the best saving rate is achieved when we are saving for a house down payment.

You know the feeling if you are saving for a house right now. It’s the American dream to own a home and we can sacrifice many things to achieve that dream. When we were saving for our first home, we rarely ate out, went to shows, or spent much money on other optional gadgets.

We are now living in our own place and the incentive to save have lessened quite a bit. We are comfortable paying the monthly mortgage and have put away some savings. We still try to save money, but we go out to eat and spend more money on entertainment these days. Some people who paid off their mortgages have extra money to spend every month. It is too easy to spend extra money on fun stuff instead of saving/investing them.

Here is the trick I find very useful. Open your mind up to real estate investing and save for another property. This is one reason I recommend buying a house that is just enough for your current situation. If you are single, buy a 1 bedroom condo. If you are married with no kid, maybe buy a small 2 bedroom townhouse. When you outgrow the home in a few years, you can rent it out and buy a new home that fits better.

I find that when we are saving for a house, it is much easier to turn down frivolous purchases like the iPad or other gadgets. I’d rather see the savings grow large enough to hit that magic 20% number so I don’t have to pay PMI. A real estate investor always want to have liquidity in case the right opportunity comes a long. This is a great incentive to save and it works for me.

What about you? Do you have any good tricks to saving money? Everyone is different and your incentive is not the same as mine. I think buying a home is a very common dream for many Americans and it is one thing that trumps our consumerism culture.

photo credit: flickr – stevendepolo

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{ 39 comments… read them below or add one }

Moneycone December 12, 2011 at 3:25 am

Here’s another trick I use when I want to upgrade a gadget (I’m a sucker for gadgets!). I don’t buy the later version till I actually sell the older version I have. I do this with laptops, iPods, cameras etc.

I’ve been thinking about RE investing. I need to put more effort into it.

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Roshawn @ Watson Inc December 12, 2011 at 5:17 am

Awesome tip @MC.

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retirebyforty December 12, 2011 at 12:08 pm

That is a great idea! I should do that too, but I tend to wait until the gadgets are cheaper. By then the old gadgets are pretty much worthless. :)

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Kellen December 14, 2011 at 5:59 am

Probably not as “worthless” as you think. Take Kindles – they dropped the prices recently, and came out with a Kindle Fire for $200. But the Kindle I like – the keyboard edition, with 3G, is still selling for about $160. And used versions are not much cheaper than that. So you might want to upgrade to a Kindle Fire – and you could sell your 3G keyboard edition for $150 or so! So it only costs you an extra $50 for the upgrade.

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Roshawn @ Watson Inc December 12, 2011 at 5:21 am

Saving for a home and not being concerned about outgrowing your current place is an interesting mechanism to “trick” oneself into saving. Like you suggest, by keeping the big picture in mind, it does diminish your desire to own the “newest, latest, greatest” toy constantly.

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retirebyforty December 12, 2011 at 12:09 pm

I don’t think buying a home with future expansion in mind is a good thing. You can easily ends up with too much home.

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Little House December 12, 2011 at 6:51 am

Buying a home is a great motivator. Although, in my case, I guess it’s not enough. I haven’t quite met my savings goals over the past two years even though I’m “supposed” to be saving for one. *sigh* I’ll do better next year! I do like the idea of owning a rental property in the future. If I can ever save for my first property, maybe that will motivate me to save for the second!

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retirebyforty December 12, 2011 at 12:10 pm

Good luck. I guess it’s different for everyone. Maybe you can try my idea and buy a small home first and then upgrade later! :)

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Jeff @ Sustainable life blog December 12, 2011 at 9:21 am

Great idea joe – having a big goal really makes it easy to save – you can ask yourself “do I want X chocolate bar/coffee now, or would I rather continue saving for a house?”

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retirebyforty December 12, 2011 at 12:13 pm

Saving for a house is a great motivator, isn’t it?

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Corey @ Passive Income to Retire December 12, 2011 at 9:44 am

I agree. Savings goals help me put the extra money away. Find what is important to you and establish a concrete goal. You and I think a lot alike. :)

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retirebyforty December 12, 2011 at 12:15 pm

A concrete goal definitely helps. It provides incentive and direction.

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Jeffrey Trull December 12, 2011 at 9:51 am

I definitely agree with this, and I am trying to save a specific amount by a specific time for a specific goal ($10k by May for quitting my job). And it’s working very well!

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retirebyforty December 12, 2011 at 12:13 pm

Good luck with the big change!

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Aloysa December 12, 2011 at 11:52 am

My best tricks ever for saving were usually short term goals: travel, for example. Saving for house is a great idea but it is a such long-term that my conscience tend to rebel and trick myself instead of saving into spending. :-) I am working on it though.

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retirebyforty December 12, 2011 at 12:17 pm

I hear you. At least you can save for travel right? :)

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krantcents December 12, 2011 at 4:53 pm

My trick is to set up a payroll deduction because it forces me to live on what is left! So simple yet it makes me more disciplined.

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retirebyforty December 13, 2011 at 10:26 am

We also have payroll deduction and max out the 401k. We can still save more from what’s left instead of using all of it on champagne and caviar. :)

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AverageJoe December 12, 2011 at 7:00 pm

I’ve found that many of my clients (and me!) became for fired up to save when there was a tangible asset. It’s always easier to save for something you can see or smell than for “retirement” or “college.” Those are tough for many people because they’re abstract.

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retirebyforty December 13, 2011 at 10:27 am

Thanks for your input. Saving for retirement and college are also difficult because they usually are a long way off. It’s tough. :)

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Hunter - Financially Consumed December 12, 2011 at 7:03 pm

I like your real estate approach to long-term wealth Joe. In recent decades property has been less attractive than other “sexier” investments, but as the US economy matures and we see less real growth, I think we’ll see more interest in real cash-flow investments like property.

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retirebyforty December 13, 2011 at 10:28 am

I think Real Estate investment became much more attractive recently with the lower price. It is possible to get positive cash flow with smaller properties now. In the 2000s, it was impossible because the price was so high.

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Aaron Hung December 12, 2011 at 7:23 pm

I trick myself by paying my ING account every week like it’s another bill. It’s working :D

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retirebyforty December 13, 2011 at 10:28 am

I love it! We might have to try this too.

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Robert @ The College Investor December 12, 2011 at 8:03 pm

I like to automate my savings – it goes right into my savings account from my paycheck every two weeks!

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PKamp3 December 12, 2011 at 10:12 pm

I’m with Robert – automate and forget about it. That’s probably the sneakiest way to accumulate savings because you’ve basically got a machine doing it for you. Pretty slick.

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retirebyforty December 13, 2011 at 10:30 am

We have auto deduction too, but we can still save a bit more with what’s left. It’s easy to spend the rest because we already saved via auto deduction. We still need some incentive to save. :)

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youngandthrifty December 12, 2011 at 11:56 pm

For us, having the mortgage THERE just makes us not spend as much.

We were recalling the “good ol’ days” when we used to go out for dinners all the time, or go snowboarding whenever.

Now it’s a treat to go out for dinner (well dinner that costs more than $10 per person anyway) and a once a year thing to go snowboarding!

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retirebyforty December 13, 2011 at 10:31 am

Ho ho ho, you guys are getting old. I used to go snowboard all the time too, but haven’t gone for a few years now. Your huge mortgage is definitely an incentive to not spend. :) It’s tough in your market.

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StacyWB December 13, 2011 at 12:01 am

Real Estate will always be an attractive investment. Invest in a college town where students continue to attend despite the economy. You may even consider buying a condo or townhouse near the school you attended and go for games, alumni events, etc… Hopefully the income from rental WILL afford you some neat gadgets like iPads and iPhones. ;>)

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retirebyforty December 13, 2011 at 10:32 am

We live right near a university and my brother has a condo for rent there. It’s doing ok, but the HOA just went up. We’ll need to increase the price next year.

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Tushar@EverythingFinance December 13, 2011 at 5:19 am

As Robert said, automatic savings works out very well. If you don’t see it you won’t spend it.

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Jana @ Daily Money Shot December 13, 2011 at 6:47 am

I don’t know that I necessarily trick myself into saving money. I just do it. But I have to have a goal or a purpose. Like Jeffrey, I want to quit my full-time job sometime next year and I can’t do that if I don’t save money. To me, having that money saved so I can say the words “I quit” is more important than anything I can buy.

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retirebyforty December 13, 2011 at 10:33 am

Good luck on changing your employment. Will you be self employed afterward? I’m working on that goal as well. ;)

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thefrugallery December 13, 2011 at 11:33 am

The biggest way I trick myself into saving is immediately putting money into our savings account after I save it. For example, if I have $5 in coupons at the grocery store, I put that $5 into savings. Skip the soda at a restaurant and get water instead? $2 into savings. These little amounts really add up. I am basically downsizing my life and saving the difference and it’s really not that painful at all!

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retirebyforty December 13, 2011 at 3:44 pm

That’s a great tip! I need to try that. How do handle the logistic? Do you just transfer money from checking to saving?

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Christa December 14, 2011 at 2:37 pm

My way to save is to direct deposit a portion of my paycheck into savings. It doesn’t have to be much; even $25 can add up to $600 over the course of the year.

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Lindy Mint December 15, 2011 at 1:41 pm

I agree that having a goal is a huge motivator for saving money, but I think the key is that it has to be something you really want, and you have to have a short time frame. If it’s too vague or too far into the future it’s easy to slack off.

When I want to save more I trick myself by making my automatic transfer higher. That way it forces me to live on less.

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Lisa @ Cents To Save December 15, 2011 at 8:22 pm

I have sub accounts at Ing that get auto deposits every other week. Out of sight, out of mind. :)

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