Do you have the sneaking suspicion that your spending has gone awry? One way to determine whether you’re on track with your financials is to try a simple experiment. For a week, limit yourself to just the basics – no restaurant dining, say, or going to the movies – and see whether you can reset your level of spending expectations. If you treat it like a game or a temporary experiment, knowing it will end in seven days, you may find you become accustomed to the changes sooner than you think.
You can then extend that experiment to two weeks, or even a full month, to really gather the spending data. You may also realize you have more money in your account, which can be applied to savings or a retirement plan. That’s an important step, since financial experts advise that people save 15 to 20 percent of their gross income. Then, when you add extras back, you’ll have both a better grasp on your spending habits and more appreciation for those goodies you cut out.
Riding the Adaptation Phenomenon
It’s all based on a psychological phenomenon known as “adaptation.”1 This means that when something happens – positive or negative – you soon get used to it and return to feeling like your “old self.” So, if you get a raise, for example, you’ll initially enjoy the extras the added money buys, but soon you’ll become accustomed to the situation and accept it as the new normal. The other side of the coin is the ability to adjust to disappointments in the same way. The upshot: Resetting your expectations may not be as difficult as you thought.
Assessing Needs Versus Wants
The key ingredient in resetting your spending habits is identifying what the basics are and what things you can do without. It’s a matter of pinpointing wants versus needs. The answer to what you need or want may not be exactly the same for everyone. For example, one person might insist that unprocessed, organic bread is a necessity, while another would be satisfied with the least expensive loaf on the grocery shelf. As a result, you’ll need to do some soul-searching and tinker with your plan to suit your own situation and help you modify your saving habits. You may be surprised at what you can do without.
Adapting: Navigating Obstacles and Reaping the Benefits
During your month-long spending reset, be prepared to encounter some obstacles – and unexpected benefits. For one thing, if you’re accustomed to, for example, eating out several times per week, it may be hard to change your long-standing spending habits. At the same time, by cooking more at home, you may find you like the added benefit of eating healthier meals on top of saving money. Similarly, in the case of shopping, it may feel deflating to cut out the retail therapy. On the other hand, you may come to appreciate the clothes you already own even more. Whatever your “thing” is, you can experiment and assess the results on your saving habits.
Temporarily cutting back your spending to the necessities can be a useful way to assess where you’re overspending, while gaining a few extra dollars along the way that can be better applied to any number of things, including savings and retirement. And thanks to the phenomenon of adaptation, you’re likely to discover that it isn’t that hard to modify your spending habits and become accustomed to your new regime. Try it for a week. When the week is up, you can slowly and thoughtfully add back the things you really miss as you evolve into a more thoughtful, resourceful spender.
1 David G. Myers. “Psychology, 10th Edition,” Worth Publishers, 2011.
2 Douglas Hawks, “The Difference between Wants Vs. Needs in Economics,” Study.com, 2003-1018.