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Living 'below' your means, tips, experiences?
June 3, 2014 7:51 AM   Subscribe

How'd you make a long term mental transition to having lower income without going crazy or going into debt? Say you made more money before and then because of life goals (or worse) your income was very much reduced. How'd you prepare? How'd you go against the tendency to spend your money? In other words, how do you not stress about money when you are able to save more money than many people make in a year?

My wife and I are very lucky/smart/etc to have very good incomes (~$200k/year combined) and I have a sizeable trust (enough to fund a child's college), which gives me a little psychological uneasiness.

We are fairly young (late 20s, early 30s) and pretty early in our careers. I'm pretty set about my career in a burgeoning field with good long term prospects. It's not a passion but I'm good at it, have great network, etc.

She's a young associate at a kind of high powered law firm, and doesn't want to work there more than a couple years (which I whole-heartedly support). Her long term plan is either something different or working at a lower salaried law job in non-profit or legal aid. In any case her long term income will be lower. We also look to travel/live abroad for a couple years, hopefully at a level where we break even financially.

We are not extravagant spenders on material goods- our cars are 10+ years old, do not buy expensive clothes etc, but we value living in walkable neighborhoods (so our home is locally expensive) and enjoying food and drink and travel. I've tracked every dollar spent and made since I have been working so I'm keenly aware where the money goes.

We are able to save about 10% of our income (and another 20% goes to 401ks), but I want to be able to be confident that when our income goes to just one income (or slightly more) or if we have kids, we can be able to not feel the pressure to dip into the trust fund to live our own lifestyle.

Tips on making the trust less 'accessible' (I'm in complete control of it) are good. Dipping into the trust to do anything other than pay for children's education or extreme emergencies is something I don't want to do as I feel like my (extremely thrifty, immigrant) parents didn't save their money so I could go live large. (giving the money to charity is probably off limits too) Thanks!

Also, I know very much how to spend less money (i.e. get rid of one car, sign up for credit cards for points, pay off cc balances, use airbnb) so the question is more about how to psychologically spend less money.
posted by sandmanwv to Work & Money (25 answers total) 70 users marked this as a favorite
 
Do you use your bank account balance as the primary way to know how much cash you have to spend? If so, you might consider taking a certain amount "off the top" and moving it into savings every paycheck. You'll still have it, but you won't "see" it, and it will be harder to get at. I know that I tend make different decisions in response to differing amounts of cushion in my checking account, largely regardless of how much money or assets I have access.

Great question!
posted by Poppa Bear at 8:09 AM on June 3 [1 favorite]


We are not extravagant spenders on material goods- our cars are 10+ years old, do not buy expensive clothes...

I am almost entirely sure I'm about to tell you something you already know and follow, but make sure to always factor in the repair/replacement value of something inexpensive when you purchase it. A pair of $200 boots that will last for twenty years with the occasional $50 repair, for instance, is in the long run a thriftier purchase than $50 boots that will last for two and can't be reasonably repaired at all.

The same thing goes whenever interest on debt is involved: if dipping into the trust for a major purchase means you end up paying less of it (if at all) on credit, you're saving money in the long run. Assuming you don't have a higher interest rate on your cash savings than your credit cards, you should never, ever carry a credit card balance over to the next month if you have money in the bank to pay the balance in full. I, too, had very thrifty, immigrant parents and the one piece of financial advice that was seriously instilled in me is that you should basically have a gun to your head before you pay interest on a loan you can pay off (again, assuming that interest is a net loss.)
posted by griphus at 8:09 AM on June 3 [4 favorites]


Simple. Put your wife's income (or whoever's income is going to be going down or going away) in an online savings account (I used to use ING Direct, but am moving my money out now that Capital One took over). Use direct deposit. Don't even look at the money except once a year.

Live off the income of the person (probably yours) that will not change. Budget as if that's your income and that's it.

Also - statistically, she'll still probably live longer, and she's already planning to make less overall during her lifetime. Make sure her retirement more than keeps par with yours - just in case you guys ever split up or you get hit by a meteor.
posted by mitschlag at 8:10 AM on June 3 [14 favorites]


There's a personal finance game called "Cashflow" created by the author of "Rich Dad - Poor Dad." I'm not much of a fan of the game overall (or the books, for that matter), but it did have one clever gameplay element. The board had penalty squares labeled "doodad" -- when you landed on a doodad square, you had to draw a red card and were forced to spend your money on some frivolous item (e.g. a massage chair, video game system, etc.), thereby pushing back your progress in the game.

Loosing a game in part due to acquiring too many doodads set up a nice negative association to excess spending. Psychologically, I found it took the abstract concepts of budgets and savings goals and added a more immediate reality check -- "Ooh, that thing's cool! On the other hand, it's got a doodad card attached to it - is it really worth it?"
posted by penguinicity at 8:11 AM on June 3 [1 favorite]


First off, do either your wife or you still have outstanding student loans? If yes, I'd focus on paying those off. Once they're gone you'll have reduced your monthly nut.

Second, the easiest way is to take money off the top, and ideally take it off the top before you're even used to it being there. I know my company lets me split my paycheck between multiple accounts, so you can send 50% of your income to your savings and 50% to checking, or deposit the fist $2K in your checking and send the rest to savings, or whatever split works in your situation. (401(k) deductions work too, but obviously that limits you to the annual contribution limits.)
posted by pie ninja at 8:14 AM on June 3


Hi, I'm your wife. I practiced law at a big law firm until I couldn't take it any more and then took an 80% pay cut to work in legal publishing. That was years ago. There has not been a single day I've regretted my decision.

In my last year or so of practicing I hit the student loans hard. Every paycheck, I'd set aside what I needed for the bare essentials (basically bills and a tiny grocery allowance) and immediately made an electronic payment to my student loans of the rest of it. That was enormously psychologically helpful to me because once the money was sent, there was no getting it back.

Here's what I would do in your situation. First, sit down with your spending history (it's awesome that you have this, it'll make planning so much easier) and draw up a budget. From there, cut until you get to a number that reasonably approximates what you might take in if your wife quits her job. So, your own income would be a good proxy for this.

Now, set up direct deposits and automatic transfers (to CDs, savings accounts, 401(k), etc.) so that the only money you'll see in your main bank accounts is the number you arrived at in the first step. This is your new "income." See how this feels for a while.

On the trust account and on the new asset accounts you've set up, you'll want to try to make those inaccessible except in case of a true emergency. Use a password generator to create complex, gibberish passwords for those accounts, write them down, and put the paper in a safety deposit box. You can still get in if you go to the bank, but you'll have the entire walk to the bank (pick a far-away branch) to ponder whether it's a real emergency.

Or, if you have a mortgage, put the extra into your mortgage (and close your HELOC if you have one, so you won't be tempted to borrow the money you just put in). If you can actually divert your wife's entire income to the mortgage, you may be able to pay it off by the time she quits, and having that huge expense gone will naturally make it easier for you to live on the reduced income.

Best of luck. It is great that you are preparing for this. It'll make the transition SO much easier (it was actually painless for me to take that huge pay cut because I'd been living on that amount or even less).
posted by payoto at 8:15 AM on June 3 [7 favorites]


A lot of it has to do with how you establish and influence your friend network. If you set yourself up with friends who also earn $200k/yr and who enjoy spending that money, you will have a hard time spending less. If you embrace the $70-100k lifestyle, hang out with friends who don't have very much disposable income, you will establish fewer expensive habits. Not saying you can't have a professional network with high-end lawyers, not saying you can't do an extravagant vacation with friends as a special occasion, but if your group of people is the vacation-home-owning annual-trip-planning posh-restaurants-every-week kind of crowd, you will have to ditch them when you downsize. Or you can try to influence your friend group toward smaller-expense type activities.

One of the joys of enjoying money is being able to treat yourself to awesome experiences (and purchases), but the corresponding challenge is to keep those things as a treat, not as an expectation. If you spend your time around people who expect/require those things, it's very very difficult to give them up.
posted by aimedwander at 8:15 AM on June 3 [21 favorites]


I have a trick that works well for me.

I have a current account and a savings account for money that I intend to spend. In the current account goes X per month for small stuff (hair cut, coffee, fuel, meals out). In the savings account goes Y per month for irregular but planned expenses such as holidays, replacing my phone or servicing the car (I have worked out the average monthly cost of each of these).

I also have a joint account for household bills into which I pay the half of the exact monthly amount required, and auto bill pay takes care of the rest.

The rest of the money goes automatically to an investment account where I call it "pension" but you can call it "Money I deliberately did not spend". This money never goes in the spending things accounts so I never spend it.

It turns out to be much easier to regulate my spending when there's an account balance that tells me exactly how much I have left to spend this month. I don't have to spend any effort remembering how much I already spent, or how much I will need for the car bill, or how many of the auto bill pays already left the account.
posted by emilyw at 8:18 AM on June 3 [2 favorites]


Discipline is remembering what you want.

Beyond spending to take care of our daily needs, a lot of spending is done as a proxy for psychological comfort, due to laziness, as a way to keep up with the Jones's, or in response to the immense power of advertising/marketing.

One nice thing about making the kind of money you are making is it gives you the opportunity to pierce the illusion that money can make you happy. Once you have taken care of your basic needs & comforts the amount of money you spend buys fairly small increments of happiness. Other things such as relationships, experiences, service, and connection will gain the typical person quite a bit more life satisfaction.

As you age, if you pay attention, you will likely notice that a lot of crap you spend your discretionary income on is completely frivolous. This comes from knowing yourself and who you really are.

Remember the power of small changes. Dropping that $5 a day coffee shop habit and investing it gives you $137,000.00 inflation adjusted 35 years later even if you only get 4% over inflation! Put another way, you could retire a year earlier just by adjusting your coffee habit. Small things over a long time make a gigantic difference. So, take a close look at your life, spend on the things that you can afford that matter to you, and cut back on consuming all the trivialities that are driven by anything other than you. Really, if you are living a joyful life, a cut like this is not a difficult transition at all.
posted by jcworth at 8:23 AM on June 3 [7 favorites]


It might help to sit down and work out a family budget as if your wife were not working. Start living now like you don't have the income and if and when you actually don't have it, you'll have an easier transition to a different lifestyle (ideally no financial transition at all) and you'll have a good chunk saved up. I did this when I got my first job - my partner at the time and I just kept living like we were not well-off - and I was able to save a ton of money that way. It was very helpful when I transitioned to a job where I make so little money my paycheck is a joke to everyone I know with a "real job."

I've still got the last of my savings from that job, which I had about 9 years ago now. I find the envelope trick to work really well: I have a weekly budget that is just as low as it can be, based on what I make and what I've estimated I need to maintain my lifestyle. At the beginning of the week I put that weekly budget in cash in my wallet to use for groceries, gas, parking, books, a meal out, and anything else I want or need in day-to-day life. It's a very small amount of money but I also track it in a notebook I keep in my purse so I can still see where my money goes. (Spoiler alert: it's all pretty much food and coffee.) I use my credit card only for recurring predictable expenses or for emergencies (not like "I need those boots!" but "my cat is going to die without treatment" emergencies). I have no debt and despite a lot of weird expensive emergencies this system works for me since I am able to sock money into savings and all my known expenses are always accounted for first (rent, student loans [which I am done with now], electric, etc).

For an idea, my weekly budget is about 15% of my weekly income, but that's a really small dollar amount on my salary. Try to get that number as low as you can without suffering. It might take some trial and error to get to a good sweet spot with a weekly budget.

Also with respect to the trust you might want to just say "that trust is for my kid" and not touch it for anything other than expenses rated to your child. Not small expenses: college, medical treatment, that kind of thing. If it isn't "your" money it won't be a factor in any decision making. Making the account harder to access is smart.
posted by sockermom at 8:29 AM on June 3


You sound like you may have already, but check out Mr Money Mustaches blog. He's not for everyone a lot of people scoff at what he says, but a lot of what he talks about would help you work out how to live well below your means. It's more about working for a super early retirement or part retirement but it really would fit in for what you want to do too.
posted by wwax at 9:12 AM on June 3


It's important, if you're someone with a decent job who is mindful about money, to not go overboard becoming money-phobic but to be sensible about how and when you spend your money. So, if you have a job/income, as an extreme example, you don't want to forego health insurance or drive an unreliable car, but you might want to take thriftier vacations or drive a reliable but older car. I just left a job that was about 75% of my regular income and replaced it with a job that is about 20% of that. It's fine. I have money in the bank, all the stuff. I've done it before and I'm still the same person. Here's what was helpful to me.

1. Know what everything costs and check in from time to time. This means even if you have stuff on billpay (a good idea for tracking) make sure you know how much your regular expenses are like for internet, phones, whatever. Sometimes you find there's some random "$9/month I am paying to come website that I don't even use anymore" expense. Nix those. Optimize phone/internet/whatever bills. The same is true with things that cost over time and that you can affect: home energy usage, deferred maintenance, consumables at home. Evaluate your choices and make sure they still work for whatever your lifestyle is.

2. Be a team with your partner. One of the things that makes it easier for me to not spend money is that my partner is thrifty like me. So the things we enjoy tend to be along the same lines and we like to occasionally splurge on specific things (a nice meal out, hot dogs at a baseball game) and so we can share this and share enjoying being thrifty. Our money portfolios are not at all the same but our spending habits mostly are (he manages more debt, I am debt-phobic) but we are both on board. The most important part of this is that your wife is on board with exactly the same plan you are. It's better to have a team plan that involves more spending than an austerity plan that you can't both get behind.

3. The trust. See if you can sock some of this away in an actual college fund, put some in an irrevocable GST maybe or other options. Speak to a financial advisor. This is purely a willpower issue and what I am hearing you say is that you are not sure you have the willpower to deal with this appropriately. OK, that is fine, it's good to know yourself. Get good advice about this and basically put the money off limits. Move it to another bank, lock it up in stocks so you can't touch it (you should be investing it anyhow, if it's not invested already) and think of it as "the baby's money"

4. Kill all debt. It's like phantom power suckers in your house, you just trickle money away that isn't being spent on anything but maintaining itself. Kill with fire as much of this as you can.

5. Know yourself. I think one of the biggest problems people get into when they're above subsistence level money issues is basically having magical thinking about money and about their own ability to manage it or deal with it. Money is math. Your decisions (again if you are not broke) are within your entire and complete control. The more you have a handle on what you actually want, the more you will be able to reflect that in your spending choices. The easy path is to just SAVE IT ALL but that's actually not smart money management. You have to see yourself as part of an economic community and spending money tactically aactually makes sense for a number of reasons unless you feel like you're an island. Support businesses you want to support, make conscious choices, check in with yourself (and your partner) regularly to say "Are the money choices I am making accurately reflecting my values about the world I want for me and my family?" and go from there.
posted by jessamyn at 9:24 AM on June 3 [12 favorites]


Dipping into the trust to do anything other than pay for children's education or extreme emergencies is something I don't want to do

Consider putting the money into a 529 Plan -- a tax-advantaged vehicle whose funds may only be used for qualified education expenses.
posted by Johnny Wallflower at 9:31 AM on June 3 [1 favorite]


I think a big part of this is the people and media you surround yourself with. Spending to "keep up with the Jones" is part of it, but it's also about the lack of skills that people who spend don't develop.

An example: if the majority of your food is from restaurants, you haven't developed the same skill at cooking as a family cooks 3 meals a day. If you call a handyman every time something in your house breaks, you lack some basic homeownership skills. If you hire a cleaning service, etc.

That lack of skill keeps you dependent on spending. It goes doubly if your peer group is going to view you brown bagging your lunch as weird. Or can't believe you'd spend a weekend painting your house yourself. Or if your family doesn't have a history of cleaning up after themselves.

So invest in skills now, while you are still flexible.
posted by fontophilic at 9:32 AM on June 3 [9 favorites]


Stop reading the glossy magazines that only exist to sell you things. This will make it easier to remember that 5$ face cream is just as good as 200$ face cream.
posted by travertina at 9:40 AM on June 3 [5 favorites]


One thing that got me to change my thinking and spending was to re-frame my ideas in terms of "what do I want," versus, "what does everyone else have?"

I used to drive a Mercedes and live in fancy houses, and my houses have always been decorated within an inch of their lives.

I hate to say how long it took me to really get down to, 'what is sufficient for me.' I don't have to impress anyone with anything. Not how pretty my furniture is (although good furniture lasts a lifetime--so I do get to continue to enjoy it.) Or where I go on vacation (Gatlinburg vs Paris.) Or what I drive (I'm now a very happy Honda owner.)

When I make decisions based on MY needs, and those alone, I find that I'm much happier with things in general. I like my apartment a lot better than my old house, I like my Civic better than my E320, it handles better. I like going to Gatlinburg because I get to see friends and hang out and really relax.

That's not to say that someday, I might not visit Paris again, but when that happens, I'll be able to pay cash for the whole thing and it will be amazing, not fraught with concern about how much money I'm spending.

If you find yourself pining for something extravagant or luxurious, ask yourself, "who is this for?" If it's to impress someone, or to show someone up, or something like that. Give it a miss, you won't be sorry. If it's something you want to surprise your wife with because it will delight her, or if it's something beautiful that will enhance your life, then go ahead and get it, if you can afford it.
posted by Ruthless Bunny at 9:43 AM on June 3 [2 favorites]


There are tons of great practical suggestions here. The emotionally challenging thing will be to get into a mind space where you can feel generous, and relaxed, and all of the good things that money brings, while spending less money.

Since you asked for tips on how to "psychologically spend less money," I'm going to disagree with jcworth about things like cutting out a $5/day coffee habit.

As you crunch numbers and analyze what to cut out and what to keep, it will help you to be just as mindful about what's bringing you real joy. There's the old "buy experiences, not things" bit of wisdom. There's also research to support that spending small amounts of money on frequent "treats" is a really effective way to boost your happiness. A bunch of $5 coffees can actually be a great psychological investment - one that will reliably bring you greater net happiness over a longer period of time than a giant $100K purchase on a couple of cars, for instance. (Establishing a habit and an expectation of a $5 coffee each and every day, however, may not bring this same reward.)

It's back to operant conditioning and a variable schedule of rewards and all that Psych 101 stuff.

I can't seem to find my original source - but here's an article that touches on some of it.
posted by red_rabbit at 9:50 AM on June 3 [14 favorites]


You might find some of the answers in "Too many golden handcuffs. How do I get comfortable ridding myself of them?" helpful.
posted by weston at 10:29 AM on June 3


I recommend figuring out how to live off the lower income (whoever that may be - it doesn't matter if it's your salary or your wife's) AND put a little toward paying down any debt. Bank the rest and use it to pay down debt and save for retirement.

Look for other places to save money, too. If you own a home, consider whether you could rent out a basement suite or something to that effect. Look for places to cut vacation costs.

Of course, you will want to enjoy life, so I'm not talking about totally cutting out all fun. But see what it's like to live on, say, $75k a year and then figure out what things you really do feel you need. I'm a little concerned that you say you're earning $200k a now between you and only banking $20k a year, although you may have a really big mortgage, medical expenses and debt payments. If you can set aside money and pay down your mortgage before the next renewal, you might be in a better position. But I earn far less than you and I'm a single parent in one of the most expensive real estate markets in the world...and I'm saving about as much as you are. So I'd recommend looking at what you can cut, if you want to be making the changes you mention.
posted by Chaussette and the Pussy Cats at 11:00 AM on June 3


Figure out what most effectively meets your needs. That tends to be the "cheap" option -- it tends to actually cost less when all is said and done, than failing to really meet your needs.

Develop healthy habits: Eat right, exercise, all that good stuff. Being sick is expensive, not just in terms of medical bills but also in terms of lost productivity and impaired judgment. Health care costs in the U.S. currently account for some ridiculously high percentage of national spending. Try to not fall into that trap.
posted by Michele in California at 11:21 AM on June 3 [2 favorites]


Hi, your situation sounds a little bit like mine minus the trust. Until not too long ago I was an associate in a law firm, and my spouse and I made about the same amount as your family. Twice in our lives we've made decisions where my income has been hugely reduced and we've come out fine both times. Here are things I've learned.

1. Information is power: know where your money is going and where it needs to go. Once you know where you're spending your money and how much you need to set aside to meet important goals like retirement, education funds, etc., you can make informed decisions about how to spend what you have.

2. Use this information to live, if you can, on the salary of just one of you. This is especially true when making major purchases like houses and cars. Take out a mortgage that you can afford to make payments on living on just one salary.

3. Be comfortable with choices to be different than your friends and family. In my mind this comes mostly down to figuring out what your priorities are and spending your money on the things that are meaningful to you instead of those things that seem meaningful to other people. But part of it is just getting used to the idea that maybe people will think you're a little bit different. This has always been okay with me since I feel like we've been living our lives with a sort of integrity and people realize this (rather than living in some weird frugal way that makes people feel like you're judging them for how they make their own financial choices).

It's not exactly a tip or trick or anything, but I'll tell you that in my experience the choice to be more mindful and in control of our finances has been super satisfying and I think has led us to lead happier lives. It might be as simple as knowing that most of the time when we spend money, we're spending on stuff that matters to us.
posted by sock me amadeus at 11:56 AM on June 3 [1 favorite]


If you want a community that shares your goal of high quality life with the freedom that comes from savings, check out Mr. Money Mustache
posted by metahawk at 8:03 PM on June 3 [1 favorite]


sandmanwv: "the question is more about how to psychologically spend less money."

Qualifications: I save north of 50 percent of my income, and read papers and books on personal finance and behavioral economics as a hobby.

What you're asking about has a couple of different names in the literature. Kahneman calls it 'System 1 vs System 2' thinking. Others have used the terms 'present self' and 'future self'. The underlying principle is that we can model the self as two separate systems, a present self capable of long term planning and self-denial, and a future-self bound to be much more hedonistic at an unpredictable point in the future. From this analysis, three tools emerge: plans, commitment devices, and willpower.

Plans are obviously a tool. Studies show that people who pay with credit cards spend more, unless they plan ahead. Other studies show that people do a better job of estimating the cost of something like Thanksgiving dinner for extended family, when they use a detailed analysis. So present self needs to make a detailed budget. Factor in taxes, social security, etc. The good news here is that in the era of google docs, spreadsheets are not a throwaway tool, but live on forever. I prefer to make an annual budget because you need to get away from the 'checking account balance' perspective.

So plans are a tool for present self to construct, they're no good if future self ignores them. Commitment devices are a second tool your present self can use to as a leash on future self. One example is using a freezer to put your credit cards in a huge block of ice, so they cannot be used easily. Online, you might prefer to not have Amazon 'remember' your credit card number. As a bonus, every time you have to type it in to purchase, future self will feel a pang of guilt about it. The best ones though, IMO, exploit other gaps in human psychology. Loss aversion is a well known cognitive bias whereby people are expected to prefer avoiding a loss of X more than they prefer gaining X. I've heard about a site that lets you pledge to donate a small sum to a political cause diametrically opposed to yourself, should you fail to pack your lunch every day, or exercise for 30 minutes a day, or whatever it is you want to commit future self to.

Finally, willpower is a thing. You have a limited capacity for willpower, if you overtax it, you will run out. It's driven by food, so make sure you nurture it; dieting is seen as an exercise in willpower, but it's also a bit like holding your breath. You can do it for a while, but not forever.
Probably the best use of willpower is to avoid tempting situations. Direct deposit methods mentioned above are good at keeping money out of easily reached places. Planning a new morning commute route that avoids the coffee shop could also be a good move. Exercising willpower does increase your capacity, I've read, but it doesn't happen overnight.

With that all out of the way, probably the best thing I've done is start tracking savings rate and net worth. penguincity called them doodads, but I call them Assets. A defining feature of assets is that you can convert them (sell them) for money. At one point I realized I had about 2,000 dollars in video games lying around. I slowly liquidated them, and I'm not really any poorer for it; I can reacquire them for roughly the same price later if I ever have the desire. So I don't stop buying doodads, there's no joy in that. I budget for them, I comparison shop and research them, and I reclaim their value when I'm finished, and record the depreciation as an expense.
posted by pwnguin at 12:40 AM on June 4 [6 favorites]


Since you seem smart about budgets & tracking, I am going to suggest a little idea that I think is important: money is only useful if you do something with it.

Living on one income is certainly possible: my wife doesn't work in an office because raising our family is more than enough to do. :7) So we are very careful with our money, and save aggressively.

My parents are very savvy about money. They reminded me that saving is good, but if you never do anything with the savings then it's like you didn't have it in the first place! So save with a goal in mind: a house, a landmark vacation, establishing a trust for a cause you love, making a major gift to your church, WHATEVER. You are paid for your work, and if you pick a goal then the "effort" of saving should be similarly rewarded.

Save a rainy day fund, yes. Invest for retirement, yes. But if saving becomes the goal in itself, and you deny yourself everything, then what's the point? Don't be afraid of your money.

Good luck, you can do it!
posted by wenestvedt at 7:45 AM on June 4


If you're making $200k a year, you're also in jobs where you get raises each year, at least keeping up with cost of living. Every time you get a raise, or come into unexpected money, put half of the extra into savings. So if you get a raise, which gives you $100 extra per paycheck, start saving $50 more per paycheck.

You always live off of more money than you were used to spending; half of every raise goes to spending on shiny stuff. You also continuously save more and more of your income, as a percentage.

This has been a godsend for me. I've done it for ten years of white-collar jobs, and I have substantial savings because of it, and only because of it; before doing this, I was almost incapable of putting money away.

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Other than that, long-term pruning. Don't binge diet, but slowly figure out what you value.

Use something like mint.com, that helps you see where money goes. Do it for three months, and make no changes. At the end, if you see that you're spending crazy money on something that's not something that makes you happy enough to justify it, cut back.

If you've spent a lot on clothes, but don't particularly like clothes... yeah, be conscious of that the next time you go to buy a new shirt, or whatnot. If you spend a ton on food, but don't recall any specific meal as being awesome, look at what you can cut there. Continue to spend as you do on things you love; don't diet, but remove the things that don't matter as much to you, and keep them dead.

In my case? Cars. Every 3-5 years, I traded in a car and got a new one. Nothing fancy; Elantras and Outbacks. I then realized I was spending $300+ each month or more on newer cars... when cars these days run quite a long while. Even getting a professional detailing ($100+) once or twice a year... is *dirt cheap* compared to spending on a new shiny vehicle. Meanwhile, my family loves mid-priced cars and fancy trucks... and figured out recently that life gets a lot easier with a lower price car that doesn't look as good, but gets them from A to B.

The car seems to be the largest continual single expense for Americans, and while it's *enormously* useful most places in America... yeah, you can drive a 3-series, or retire a few years early, and I value early retirement far more than a very nice car.

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Summary: sorry for the rant about cars, but I've been drinking after dinner. :-)

Seriously, the focus should be on the first bit; for any raise or unexpected money (bonus), save half of it. This is the best psychological hack of any kind I've ever found, and it was probably life-changing for me.
posted by talldean at 7:01 PM on June 4


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