Setting Up a Game You Can Win

Aka “Just Don’t Spend Money” Won’t Work

If you are spending more than you make, your initial reaction may be “I’ll just stop spending money.” Natural as this reaction is, this strategy won’t work because it's based on a negative. You need to set up a game that you can win. You need a sustainable plan for what you will do, not a general declaration of what you won’t do.

A sustainable plan for what you will spend is based on two factors: how much you have been spending and how much you make. Clearly, any spending plan has to fit within your income. Also, the plan is mostly likely to succeed if it is consistent with your current spending patterns. If your habit is to buy two pairs of shoes every month, see if you can get by with one. If you buy a latte every morning, try switching to regular coffee and adding milk. Alternatively, make yourself a cup of tea at home one day a week. Small steps, taken one at a time, will lead to long-term success.

One way to set up a winning game would be to take your “breakfast funds” out of the bank once a week, in cash. Use only that cash for your coffee and pastry and don’t use it for anything else. At the end of the week, do you have any cash left? If not, did you at least keep your breakfast spending within that cash? If yes, you have won! Any remaining cash is yours, free and clear, to invest or spend as you see fit.

I’m using breakfast as an example here. Feel free to substitute any other arena of spending where you would like to trim back.

Final hot tip: never underestimate the small stuff. Small expenses can add up to lots of money over time, either by spending or by saving on that expense.

Becky Jensen holds an MBA in Finance and has been helping people manage their personal spending since 1989. She can be reached through her web site at www.2prosper.com.