One Simple Mental Trick to Cut Your Spending and Boost Your Savings at the Same Time

published Nov 6, 2018
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(Image credit: Joe Lingeman)

Whether you are a natural spender or saver, there’s a learning curve to money management. It’s easy to dream about building an emergency fund or saving for a down payment on a house, but as we all know, those little everyday purchases multiply quickly. (We’re looking at you, Target Dollar Spot.)

What if there was a way to trick yourself into saving money and cutting back on impulse buys? Well we have one.

The Trick:

This spending/saving strategy is simple, but it could pack a big punch in your budget: Every time you make a purchase that isn’t essential—say, a Starbucks drink or a movie ticket—you match the cost and add it to your savings. For example, after indulging in an iced mocha that costs $5, you would transfer another $5 to your savings account. Easy, right?

Why it Works:

Ultimately, this practice doubles the cost of non-essential products or activities you spend money on, which will magnify your consideration of their actual value and potentially help you cut back on impulse buys. Is this iced mocha really worth $10, or could I make it at home for cheaper? How about $20 for a two-hour movie and $16 for a large popcorn—would it be smarter to wait until the movie comes out on Netflix?

On top of reframing your spending habits, you’ll also get a mental nudge to automatically add to your savings at the same time you have discretionary spending money. This means you could, somewhat passively, arrive one step closer to bolstering your savings or buying the house of your dreams.

How to do it:

Want to try it? There are a few ways to put this little trick into practice.

Most straightforward: You can manually transfer money on your bank’s app at the point of purchase—but keep it mind you will have to log in and transfer funds every time you spend, which could feel nitpicky.

If it’s easier (and you’re a spreadsheet person!), you can always keep track of your spending and transfer a lump sum into savings once a month. Apps like Mint or You Need A Budget can make budgeting easier, both giving you an accurate picture of both your assets and what you spend. There are also savings-focused apps like Qapital, which automates your savings habits based on customizable “rules,”—like, depositing $10 into your savings account every time you eat out.

(Image credit: Jessica Sharmin/Stocksy)

Who This Trick Isn’t Good For:

While a quick money transfer could solve spending problems for a lot of us, Amber Hutton, a personal and business financial consultant and loan officer, says this trick isn’t for everyone—especially if mindlessly putting money into your savings account will get in the way of paying off debt or encourage you to spend money you don’t have on a credit card.

“If you have extra cash and you’re looking to be more intentional with your savings, it’s a great idea to save whenever you spend,” Hutton says. “But this approach might not be best for you if moving money to savings encourages you to leverage debt, or you won’t be able to pay your utility bill by moving money you need out of your checking account.”

And if matching the exact amount every time you spend isn’t your cup of tea, Hutton recommends a similar, less aggressive approach she calls “rolling up.” Some apps, like Acorns and Qapital, allow you to literally invest or save your spare change when you buy something — for instance, if you spend $14.60 at lunch, the app would “roll up” to a round number ($15) and deposit the extra $.40 into an account of your choice.