Updated: Sep 14, 2019
Spending: it's not your fault. Well, it's not all your fault. With neuroscientists, psychologists, economists, and behavioral scientists all working to get you to buy, it’ a wonder we don’t spend all of our money all of the time! Reducing our spending buys us control and opportunity. Here's the one way to spend just enough and not a penny more.
In May of 2001, I visited France all by myself for eleven days, splitting the time equally between Paris and Lyon. I knew one person in each city, and figured I should visit while I still had those connections. Looking back, I had a few mini-adventures, like meeting a Swedish student on my first day and getting lost in Paris every day. I got locked out of my friend’s flat the last night and would have slept in the stairwell, had it not been for another friend who arrived from the United States to share the space. This is years before Airbnb!
It was an adventure, but one of the more lasting memories was my first day back to work. I thought about the money I had spent on the trip versus what I would usually spend on weekends and eating lunch out at work. There wasn’t a big difference. For a fleeting moment, I understood how some things were worth the delayed gratification of spending; things like visiting other countries (I was "millennial-like" before "millennial" was a thing). In that moment of deep thought, I committed to saving all my discretionary income for a new purpose: travel!
Now, I’d like to tell you I economized, budgeted, and maintained a monk-like discipline until my next international vacation. I’d like to tell you that, but it wasn’t true.
Despite the extraordinary experience of my first (and only) solo international adventure, I was the same person who didn’t pay much attention to what I spent. When it came time for my next paycheck, I continued eating out for lunch, buying CDs - OK, I really am just an Gen-X'er - and over the course of the year, I spent money on things that were not a high priority for me. The only things that hemmed in my spending were the non-discretionary expenses, like rent, my car and student loan payments. Sound familiar?
20th Century Banking
In the early to mid-1990s, I was a full-time college student and full-time bank teller. I worked for Household Bank, which was purchased by Central Fidelity, which was purchased by Wachovia, which was purchased by First Union (but retained the Wachovia name) and then finally purchased by Wells Fargo. In those days there was no internet and so to keep track of their money, people either waited for their monthly bank statement to arrive in the snail mail or they came into the branch. When they visited the branch they asked for a "printout" which all of us bank tellers knew was a preliminary statement of transactions. Even then, most of the people coming into the branch were either business owners or retirees. They had reasons to keep up with their spending and they were incredibly intentional about what they purchased. This "intentionality" gave them control over one of the most important parts of their overall finances -cash flow.
Also in the early 1990s (1992), the National Livestock and Meat Board launched a campaign that I still obviously think about: Beef. It’s what for dinner. I would like to launch a similar campaign: Spending. It’s not your fault. Well, it’s not all your fault. As Daniel Pink will tell you in his bestselling book, To Sell is Human, we’ve been selling (and therefore been sold) to each other by amateurs and professionals, for most of our lives. Now we have neuroscientists, psychologists, economists, and behavioral scientists all working to scientifically market (sell) to us all the time (during all of our lives). Have you ever heard of “ethnographic study?” I hadn’t either until I started researching for my Joy of Financial Planning book. Apparently, ethnography has a lot to do with the study of people in their own cultural and social situations. It’s what marketing firms are doing now; instead of just A/B testing us on our website activity. Our interactions with products and services are being observed like some random Discovery Channel rerun of lions chasing gazelles. Business has deftly moved into the area of brain science, brain activity, and your innate reaction to marketing stimuli. In other words, they’re just skipping past your logical assessment of value for your less consciously-regulated emotional response. When you buy it's your decision, just not always a conscious one.
How do you get past your own brain? In a world where business is neuromarketing and "zero-second branding" how do you...not react? You become aware and you prepare. To become newly conscious to the spending imposed upon your amygdala, take a few tangible steps:
Log in to your bank account online
Review each transaction for the past month
Separate them into non-discretionary vs. discretionary
Total each category
Step 1: Today we don't have to go into a bank branch to get a "printout" like those overtly cost conscious business owners and seniors I met in the 1990s. Almost all of us can pull out our phones and log in to see what's going on. You may use a bank application or a 3rd party application like Mint, YNAB or CountAbout to login and see what's going on. It just takes a few seconds to see.
Step 2: The easiest transition from not really looking at your accounts to looking is to just view the balance - don't just do that! Take a look at each transaction and ask yourself, "Was that really the best use of my money at the time?" Don't ask anyone else, this is your money. Just ask yourself.
Step 3: This is where you may use the programs I referenced earlier - Mint, YNAB, CountAbout, etc. - to really help you make a difference. These applications, or just a spreadsheet, will help you sort the transactions into things you feel like you have to spend (non-discretionary) and items you spend on because you can (discretionary). Notice which list is longer.
Step 4: Total the two categories of discretionary vs. non-discretionary and ask yourself if you intended to spend as much as you did in each. For non-discretionary items like rent/mortgage payments and car payments, are there any alternatives? For discretionary spending like dining out, cable or clothing, again, any alternatives?
Viewer Discretion is Advised
Excessive spending is not entirely our fault; we are taught it, encouraged to do it, and manipulated into it. There are scientists whose sole purpose is to get us to buy, either consciously or subconsciously. The greatest defense against unintentional spending is awareness. Spending and saving create similar “highs.”There is a “high” associated with spending that we can easily understand. There is also a “high”associated with the discipline of saving, once the results begin to accumulate. Give yourself time for the latter. Then you'll get what you really want.
And then you'll be able to change the world, for the good. And assuming you are one of the people who will take on that challenge, I will thank you in advance for your service.