How to Spend Less

I get asked a lot, “What’s the best way to earn more money?” That’s a great question.

Most people think that to increase your net worth, you have to get promoted, find a higher paying job, take on a side hustle, or capitalize on your investments. But there’s a simple, easy way to automatically earn more income that most people aren’t thinking of. And you can do it today! It’s simply to spend less.

Here are five ways you can spend less:

1. Journal Your Expenses

Managing your finances is a lot like dieting. Those who are on a diet and keep a food diary lose twice as much weight as those who don’t write down what they eat.^[1] I’d venture to say that it’s the same if you’re tracking your spending. Write down every purchase or expense.

When you start journaling your expenses, you’ll be shocked at how many times you won’t spend the money if you know you’ll have to write down that expense. When I was 14, I started tracking every penny I ever made. Once I thought about buying that Snickers at the quick grocery line. But as soon as I realized I’d have to track that purchase—I said no thank you!

Once you get in the habit, it takes seconds to journal what you’re spending every day. You can use an app, a notebook, an Excel spreadsheet—whatever suits your fancy!

Then look over all your expenses at the end of the month and see where you’re at. You can’t make adjustments unless you know where the money is going in the first place. Add up what you’re spending on take out or what unused subscriptions are costing you, for instance. Find your problem areas and make reductions. Knowledge is power.

2. Prioritize Giving and Saving

The way most people approach their finances is that they spend first, then they save what little bit is left over. If you operate your finances this way, there’s nothing left to give.

One of the best ways to get control of your finances is what I call the cashflow continuum.

• Tithe 10%: You start by giving 10% off the top as your tithe. God comes first.
• Save 20%: Allocate the next 20% to long-term saving. This isn’t just putting it in a savings account. That’s only delayed spending! The 20% goes into retirement accounts that you can’t excess until retirement age.
• Spend 70%: Learn to live on the remaining 70%. Live within your means. Just don’t go into debt or exceed that 70%.

If you follow this model, you’ll spend last instead of first because you’ll have your priorities in the right order.

3. Look at the Real Price

When determining the cost of an item, people automatically look at the sticker price, but they don’t count the true cost of what it will cost them over their lifetime. What do I mean by that? The cost of spending the money now versus what it would be in 10 to 15 years if you were to take the same amount of money and invest it.

For example, if you look at a $500 TV. That $500 TV is not costing you just $500. Instead, it’s costing you $1,500. How did I do that math? If that $500 was invested at 8% over the next 15 years, you could potentially triple the original amount. That’s the power of compound interest!

Also think about what it costs you in time. I’m referring to the time that you’ll spend watching TV that you could have spent investing in yourself, maybe reading the next book that will give you the next idea for your million-dollar business.

This is similar to what I like to call magnetic spending. Many people buy haphazardly. They don’t realize that by buying a new car, they have to buy all the accessories that go with it. I’m sure you have friends who buy a new home and have to furnish it with the latest new furniture. All of the sudden, what they have isn’t nice enough. Beware of buying items with hidden costs over and above the initial price.

3. Carry Your Wallet Less

I’m infamous for never having my wallet. If your wallet’s always handy, it’s all too easy to pull money out or swipe your credit card, especially when you weren’t planning on buying anything. Spontaneous purchases and impulse buys add up fast! I only bring my credit card in with me when I know I need to make a purchase and I already know what I’m buying.

In this day and age of virtual wallets, this might mean leaving your phone in the car if you’re notorious for using Apple Pay everywhere you go. Won’t you enjoy the experience more anyway if you’re unplugged and present in the moment?

Be counter-cultural. Leave the wallet or your phone in the car when you shop. Do your research and plan out your purchases. Only shop with a list. And only take in whatever cash or card you need when you go into a store.

4. Go on a Spending Freeze

Try a spending freeze for two weeks—or even a month, if you’re brave. Pay your rent and utilities, put gas in your car, but get by on the rest on the lowest amount possible. This means no Amazon purchases. Cancel subscriptions. Make coffee at home. As long as you can, eat out of your freezer and pantry instead of eating out—who knows what you’ll find in there! Do free outings as a family like exploring local parks or going to free events at the library or community center. Take advantage of free dates like a game night or a picnic. I’ll remind you that volunteering is a completely free activity!

Think of a spending freeze as a financial fast. Work the self-control muscle and build self-discipline. Make a game of it. You’ll be shocked by how little you can live on! This will show you some areas to cut back on as well in your normal spending.

5. Be Choosy About Your Friends

This may sound extreme, but hang in there with me: Be careful who your friends are. You are your five closest friends. No really, it’s true! Research proves that you have the average financial and health metrics of your five closest friends. You are far more influenced by those around you than you even realize.

It’s proven that you’ll automatically spend money if you’re constantly around people who spend money. If you do life with people who live above their means by eating out all the time, spending more than they make, and focusing on material things—guess what? You don’t want to stick out.

Summary

Most people think you have to make more money to have more money. But often the surest way to make more is to spend less. Make the tough calls to reduce your spending, and use these newfound savings to pay off debt, give more, and honor the Lord with what he’s given you.

[1] https://www.sciencedaily.com/releases/2008/07/080708080738.htm