3 Ways to Save Money Without Depriving Yourself

January 22, 2015

Did you make a resolution to save more money this year? According to a recent Fidelity study, that was the most common financial resolution, cited by 55% of respondents. It sounds a lot like the financial equivalent of dieting but here are three ways to save money without depriving yourself:  

Stop Wasting Money

If you go through your expenses, you’re likely to find two forms of waste. One are those things that you pay for and don’t really use like a subscription to a magazine you don’t read or cable channels you don’t watch or a membership to a gym you don’t go to. Some of these may be old habits that are now obsolete. (You read the magazine and watch your shows online now.) Others may be aspirations that turned out to be unrealistic . (You went to the gym once…)

The second category is stuff you do use but there’s a way to get the same thing cheaper. Examples of this would be using a prepaid cell phone plan with the same coverage but lower costs, using coupons or going to a wholesale store like Costco or Sam’s Club for groceries, going to a matinee for a movie, and making Starbucks coffee at home instead of getting it on the way to work. This is really just a matter of thinking through your purchases and seeing how seemingly small savings can add up to a lot of money over time.

Buy Less Stuff

Another way to spend less without depriving ourselves is to get more bang for the bucks we do spend. One of the biggest mistakes people make is overestimating how much purchasing things will make up happy. We imagine that the pleasure we get from buying a new gadget or a new item of clothing will last as long as the product we purchased.

However, new research in behavioral economics shows that this pleasure is very transitory and that we’re better off buying experiences instead. That’s because we get more enjoyment from anticipating the experience, we enjoy the experience more because we’re less likely to compare it unfavorably to other people’s experiences (unlike comparing our toys to the Jones’), and we enjoy the memories of the experience more. So while that trip to the Bahamas may only last a week, the enjoyment will probably last much longer than something we buy and keep for ten years.

Buying stuff also comes with headaches that can last much longer than that enjoyment period. If we accumulate too much of it, it ends up creating clutter or the need for more space. If it’s valuable, we have to constantly worry about losing it, breaking it, or having it stolen. After a while, we can feel like a caretaker of our stuff and you start to wonder who owns who.

Treat Yourself But Sparingly

Finally, spending less in certain ways can even increase your enjoyment. That’s the point made in this article about Harvard Business School professor Michael Norton’s new book Happy Money: The Science of Happier Spending. Norton argues that if we indulge too often in our favorite luxuries like a spa treatment or a really nice restaurant, we become used to them and they no longer provide the same level of pleasure. On the other hand, if we decide instead to treat ourselves more sparingly, we’ll actually enjoy the experience more.

How about you? Have you found any success with these or other saving strategies? Leave your thoughts in the comments section below.