The Sunday Mail
HAVING to make little sacrifices every day is unsustainable, especially when it comes to money. This is the way human psychology works.
The more you deprive yourself of little things, the unhappier you will become.
Out of all the tips used to save money over the years, below are the most impactful money-saving tactics to boost your savings rate without sacrificing any happiness.
Consistency
Consistency is key to anything in life, from going to the gym to brushing your teeth.
Think about this: We start with our new year’s resolution by going to the gym. We run on the treadmill and come back home, look in the mirror and see no change. We do the same the next day and see no change. We repeat this for a week and see no result, so, we quit. Rather, run 30 minutes a day, five days a week consistently and you will eventually notice a difference over time. If we believe fundamentally there is something there, we then need to commit to the regime consistently over time.
This brings me to investments. Consistency matters in the same way as the above.
In this case, staying invested, putting away capital monthly or even quarterly will yield phenomenal results over time.
Enjoy the magic of compounding while you do things you love.
The noise does not matter as, over time, it will be long forgotten, but the regret of “I should have” will remain.
Limit the luxuries
Buying coffee is not a luxury if it makes you happy. Rather than worrying about the coffee you enjoy, focus on managing your long-term goals first by automatically putting money into savings and investments each month.
Then, after you pay your expenses, you can use any leftover money guilt-free.
Big fancy houses and fancy cars are mainly financed by debt, and if other expensive luxuries that you never use are added, you constantly pamper ourselves with fancy “stuff”, but you collectively become more depressed.
This is called hedonic adaptation. When you get a bigger house, a nicer car, a promotion at work and a bunch of new shoes, it feels good at first, but then you quickly adapt and return to your baseline level of happiness.
You can buy a big house, but do not forget that an unnecessarily large home comes with unnecessary large expenses.
Use money to buy time
One study found that spending money to save time makes you happier than spending money on material goods.
Commutes are some of the biggest contributors to life satisfaction. If your commute is horrible, it is probably worth paying up for a home that is closer to your work or finding a new job. Is your mattress old and makes you wake up with back pains? Get a new one.
If you hate cleaning your home, paying for a cleaning service will probably make you happier than a new car. If you have a high income, spending money to save time might even result in more income overall.
When you decide to spend money to increase your happiness, it is clear that saving time and eliminating the worst aspects of your day gives you the best bang for your buck.
Pay yourself first
Whether it is your offshore, local or tax-incentivised investment, make sure you pay yourself first. If you are saving too much, lucky you. If you cannot buy all the stuff you want, then perhaps consider a side hustle.
According to American billionaire Warren Buffet, “Do not save what is left after spending but spend what is left after saving.”
Budget
Not everyone likes to budget.
For me, to save money, minimalism works better than being a constant budgeter, and tracking every expense.
However, at the very least, perform an audit of your expenses once in a while, and see where your money truly goes.
Ramit Sethi, author of “I’ll teach you to be rich” says: “There is a limit to how much you can cut, but no limit to how much you can earn. Frugality will only take you so far. You can only cut so much! But you can always earn more, and once you learn how, a lot of your money problems will disappear.” – Moneyweb
