If you’re trying to get your spending in order, one of the more powerful ways to do so is to embrace the “pain of paying,” as Joe Pinsker writes in The Atlantic. That means, for one, paying for things with cash instead of credit.
Because credit cards allow us to buy now and pay later, we tend to feel better about our purchases and overspend; paying with cash is a mentally more painful way to buy something because you’re parting with your money then and there.
By harnessing that pain of paying, you might be able to save some money on discretionary spending, writes Pinsker, who says he records every credit card transaction in his phone after making it.
“After I buy something, I log the transaction on my phone, recording the price and what I bought,” he writes. “The idea is to increase the pain of paying, especially with a credit card, by forcing myself to take note of what I’m spending.”
After instituting the rule, Pinsker estimates his discretionary spending dropped 10 to 15 per cent, adding that while it increases the pain in the short term — a good way to forgo impulse spending — it alleviates the pain of not knowing how much your credit card bill will be in the long term. A win-win.
One way to improve upon Pinsker’s system, as suggested by behavioural economist Dan Ariely: Log the purchases before you make them. That’s more likely to discourage superfluous spending.
Another suggestion from Ariely is to consider what else you can buy with the money you’re about to spend. For example, you can make a rule that you have a certain amount of money to spend each week, and any money left over at the end of the week can be spent on a dinner.
Budget trackers offer ways to do this, but the idea of logging your transactions in a Notes app (or something like Bear or OneNote) has a simplicity to it that can be appealing and less time-consuming than breaking everything down by category.
Pinsker notes the system won’t solve all of your money problems. “There are usually more savings to be had from revisiting one’s auto- or home-insurance policy, or one’s phone bill, than from skipping the marginal cup of coffee,” he writes. And making so many micro-decisions could add to your money-related stress. Some spending on frivolous things is just fine, after all.
But if you’re trying to cut back on or get a better grasp on your discretionary spending, it’s a good system.