I received the following comment today from a reader about my earlier post Simple Solutions to Staying Out of Debt:

“All good advice - sadly, it is harder than it sounds. But then again, the more you make the more you can spend, so figuring out how to live within your means is a lesson we should all learn at an early age!”

Yes, it is harder than it sounds; almost everything is. But what it all boils down to is common sense, self-discipline and keeping your priorities in mind. It is true that it would be ideal to learn such lessons at an early age, but there is no reason why an adult can’t learn to control his spending and live within his means if he truly wants to.

Don’t get me wrong. I am human and I know how hard it can be to resist spending on things you want. For example, here is just a snippet of some of the things I have been coveting for a long time - some for years.

• A laptop computer
• My favorite TV shows on DVD (Friends, X-Files and many more)
• Subscription to cable (which we haven’t had since 2001)
• A cushy armchair for reading in my bedroom
• The complete British and French editions of the Harry Potter books (I collect foreign editions of Harry Potter books)

These are just a few of the things that cross my mind at the moment, but I know there are more. Over the years, I have been tempted more than once to buy some or all of these things, but I know the danger of giving in to the urge to splurge, because spending or getting what you want is addictive. Oftentimes, when you get one thing, you want or need to get more things to go with it.

I know it’s annoying to hear these words because they’re so “self-help-ish” (I myself can’t stand self-helpers and trite inspirational “don’t underestimate the power of the mind” stuff), but -

The tools for fighting the urge to spend are:

• Recognizing your priorities
• Rational thinking (not rationalizing)
• Self-discipline/self-control
• Will power
• Rewarding yourself

Recognizing Your Priorities

For most of us, our main goal is simply to “save money” or “save as much money as possible,” and that works well enough. But maybe for some of us, that goal simply isn’t enough. If you have a strong penchant for spending, you may need more clearcut reasons than “to save money” in order to curb your spending. So you will need to contemplate the following question.

Why do you want or need to save money?

Is it …

• To save for a down payment on a house of your own?
• To save for a replacement car?
• To save for marriage and a family?
• To save for a personal or family emergency?
• To stay out of debt?
• To get out of debt?
• To achieve financial freedom?
• To make sure your loved ones are provided for?
• To make sure you have enough to live on should you lose your job?
• To be able to retire when you want or need to?
• To make sure you have enough to last through your retirement?

Knowing and reminding yourself of your priorities at all times will help make achieving your goals easier.

Rational Thinking

Rational thought is necessary in order to succeed at anything including spending and saving money. When tempted to spend on something you don’t need or can’t really afford -

Try to look at the item in question with objectivity (without emotion) and ask yourself the following questions (The “it” in the following questions can apply to any kind of expenditure. Buying a tangible item, a service, eating out, etc.):

• Do you really need it?
• If yes, why do you need it?
• Are your reasons for needing it valid?
• Can you really afford it?
• What do you already have that can be used instead?
• What will its value be 6 months down the road? 1 year? 5 years?
• If it is a tangible item will you still be using it?
• If it is an intangible or transient item, is it really worth spending money on it that you would otherwise never see again?

Also consider:

• The potential value of the money saved from not spending it and saving or investing it. Use the savings calculator on Prune Your Spending and Watch the Savings Grow to see how much a little money saved over time can become.
• If you really think you have enough money saved for your future or financial goals.

Self-Discipline/Self-Control

No one likes hearing about discipline. It implies strictness, lack of freedom, and unpleasant tasks. But without self-discipline, one can never achieve success or financial freedom. So when confronted with a tempting expenditure:

• Plan A: Walk Away
  The best way to exercise your self-discipline when confronted with temptation is to simply walk away - or close the browser window (and clear your browsing history and cache to make it harder to accidentally happen on it again.)
• Plan B: If you can’t walk away, then wait.
  If you have a hard time walking away from the temptation, then at least wait. Convince yourself that you are not flat-out denying yourself what you want, but rather waiting for a sale or a price reduction. You will often find that by the time the price has decreased, so has your desire for the item.

  If it turns out you do still want the item, at least you will be spending less on it. Also, by delaying your expenditure, you can earn a little more interest on the money to be spent.

Will Power

You will find that as you practice self-discipline, your will power will grow. There will come a time when you can see something you really like and simply be able to admire it and move on without a struggle.

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We would like to thank the following Blog Carnivals for featuring our posts.

(This list will be updated to include future inclusions for the month of June 2008.)

Descending chronologically by inclusion date

• June 25, 2008
  Finance Fiesta 4: Cerveza Edition
  Article: Monopoly Game Expansion #2: Personal Checking Account
• June 23, 2008
  Carnival of Personal Finance #158 : Vampire Slaying Edition
  Article: Monopoly Game Expansion #1: Personal Savings Account (Editor’s Pick - double thanks!)

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Expansion Difficulty/Complexity: Medium-Easy

This Certificate of Deposit was the second expansion we created for the game (invented by Madoline) of Monopoly. After the Lottopoly (coming soon), I find this to be the most fun. The interest rates are rather high compared to real-life CD’s, but they help to illustrate the point that investing pays off, and it is so much fun watching the money add up.

Objective

To learn the system and benefits of saving and investing via Certificates of Deposit (CD’s).

How to Play

• Download and print the Bank of Monopoly Certificate of Deposit Form (includes rules).
• Banker
  Designate a player to be in charge of CD’s. This person will receive and deposit into the bank the money to be invested, fill out the CD form, keep track of players’ passing of “Go,” calculate interests and penalties, and pay out the earnings from the bank.
• Opening a CD
  Deposit the amount to be invested in the bank and fill in the player’s name, opening balance and term of deposit. The term is the number of “months” or circuits around the board. Deposits may only be made on the turn when a player passes or stops on “Go.” Once a deposit is made and the term is set, it may not be changed.
• Marking off the months
  When a player passes “Go,” the banker marks off a circuit under 1st, 2nd, and 3rd Months. This indicates the passage of time. If a player purchases a CD for 1 month, his account is considered mature after one full circuit of the board. 2 months require 2 full circuits, and 3 months require 3 full circuits.
  Note: Going to jail does not constitute a circuit as one does not pass “Go.”
• Payouts
  When a player passes “Go” for the last time, his/her earnings are calculated and the balance paid out.

Click on the image below to see a sample

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Welcome to the 3rd edition of the Finance Fiesta. I’ve always enjoyed proverbs, and since Spanish is one of my favorite languages, our theme for this week’s fiesta is Spanish Money Proverbs. The following proverbs all come from A Polyglot of Foreign Proverbs for anyone who wants to know. Hope you enjoy them.

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Expansion difficulty/complexity level: Easy

This is a basic savings account add-on for the Monopoly game to teach the principles of personal savings. The rules are few, with easy to calculate interest rates and a simple form to keep track of each player’s individual savings. While the interest rates are higher (for easy calculation) than they would be in a real-life savings account, this game can teach children the basics and benefits of saving money and how banking and savings accounts work.

Objective: Learning Basic Money Saving Techniques and Principles

• Develop a regular habit setting money aside for a rainy day or future investment.
• Watch your money add up a few dollars at a time.
• Experience the satisfaction of greater earnings and faster growth as interest rates increase with your balance.

To play the Monopoly Personal Savings Account Expansion

• Download and print out the Monopoly Personal Savings Account Statement (with rules)*
• The Personal Savings Account Statement contains a form for tracking:
  • Opening balance
  • Interest Rate which increases as balances grow
  • Interest Earned
  • Credits and Debits (Deposits and Withdrawals)
  • Closing Balance

Click on the image below to view a sample form

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Madoline and I live in fear of debt; that is one of the reasons we are so vigilant about saving money. We have witnessed firsthand the consequences of extravagant spending and debt (perhaps we will share these stories at a later time), and that is why we live the way we do. So how do we stay out of debt? The solution is so simple it almost doesn’t seem like bona fide advice, but it really is.

I know everyone hates hearing these trite statements, but the reason they are so often repeated is because they are true. In fact, they are so basic they should be considered common sense. These principles work for both staying out of (and maybe even getting out of) debt.

The simple solutions to staying out of debt are:

• Spend less than you make
• Don’t waste money
• If your expenses are higher than your income
  • Cut back, and/or
  • Make more money

How to spend less than you make

Before you spend money on any treats for yourself, set aside what you need to pay your regular bills. If you aren’t able to keep from spending that money by only mentally setting it aside, try the following:

• Open a new bank account for your regular expenses (rent, utilities, etc.). Tip: Credit unions offer accounts without fees or minimum balances. Let’s call this account your “Expenses Account.”
• Add up all your bills and expenses at the beginning of each month and transfer that amount from your main account to your Expenses Account.
• If the bank or credit union issues you an ATM card and/or checks for that account, keep them in a safe place at home instead of carrying them in your wallet or purse.
• If you get paid every 2 weeks and your bills are due at the end of the month, try not to spend any money on luxuries with the first paycheck of the month. If your expenses are less than the amount of your paycheck, put all of that amount into your Expenses Account, plus a little extra padding just to be safe (to prevent overdraft charges in case you added wrong).
• After you have set aside all the money necessary to pay your bills, see how much you have left. Put as much into savings as possible, but if you feel like you need to treat yourself to a little something, do so at your own discretion.

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