The Amount We Spend On This One Thing Really Surprised Me

November 15, 2017

When it comes to planning your spending (sometimes called that nasty “budget” word), there are many ways to do it. I’m personally not one to track every penny or even allocate between shopping, dining out, travel or wine, but some people are. There’s no right or wrong way, just the way that works for you — diff’rent strokes for diff’rent folks.

While I don’t track specific categories of spending, I do like to be prepared for things that might come up that I can’t avoid, which is why I have a savings account labeled “car expenses” where I auto-deposit $25 per month — when something comes up with my car, whether it’s a dead battery, new tires or even just the annual oil change (I drive an older MINI Cooper, so it’s not cheap), I like to have the money set aside. What’s worse than having to cut back on wine because your stupid car broke down?

But a recent article that breaks down where paychecks tend to go caught my eye and has me considering adding a new auto-save category to my money. What caught my eye?

We spend an average of 8% of our income on healthcare.

Eight percent! If you had asked me what percentage of income I thought I was spending on healthcare, (not including fertility treatments), I probably would’ve guessed about 5%, which I would consider high due to the year I’ve had. (have I mentioned I hit my insurance out of pocket max in August?) But 8% really struck me — how many people are putting 8% into their 401k? If you’re not, I imagine it may be due to the fact that you feel you can’t afford it. But healthcare expenses are here and now — we can’t afford NOT to afford it.

So what to do with this revelation?

Planning ahead for the unknown

I’ve said before that the biggest budget breakers aren’t usually shopping sprees or vacations, although those can exacerbate the problem. What usually breaks budgets are random, one-time expenses that you really can’t predict. Or you can predict them, but you’re not sure exactly when they’ll strike, such as knowing your hot water heater is 13 years old, but for now it’s still steaming…

To get ahead of this, rather than trying to come up with the money to pay for healthcare expenses out of your spending money when they happen to pop up, just plan for them. Use the 8% guideline or find your own by adding up all your costs so far this year and dividing it by your income. Then set up a separate account just for healthcare expenses.

So if you make $60k, that’s $4,800, but keep in mind that the total includes any premiums, co-pays and even non-insurance covered stuff like acupuncture or therapy. If you have a Health Savings Account, make sure you are making full use of the tax-savings capabilities by running all eligible expenses through there. And if you happen to be reading this during open enrollment and use a Flexible Spending Account instead, make sure you’re not short-changing yourself by underestimating your expenses! It’s true that it’s ‘use it or lose it,’ but you can always stock up on band-aids, sunscreen and aspirin if you have some left over. (or try acupuncture!)

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Could This Be The Real Thing That’s Keeping You From Saving More Money?

October 25, 2017

Scene: Pet store, just before Halloween.

You walk in and the first thing you see is that all pet costumes are 40% off. Of course you stop to look, and ohmygosh, that princess costume is exactly what your Siamese cat needs because come on, she’s the most royal of them all. It wouldn’t be fair to just dress her up, so you also pick out a Jester costume for the kitten, which is actually kind of purrfect since he’s constantly annoying her while she’s holding court.

Holding court with the commoners

You move along to the next display and see that they also have Christmas collars and who doesn’t want their cats to be dressed up for the family photo?

And just like that, I went from buying a bag of cat food to (almost) spending $75 on impulse buys that I absolutely, 100%, would have regretted within a week.

A real joker

Sound familiar?

Each item on its own didn’t seem like much (although $25 is actually a lot of money for a cat costume, now that I’ve left the store and regained my rational mind), but this is how retailers snag your dollars. They KNOW that you’ll be drawn to those displays and they know that you’ll already be adding up the social media likes and comments before you even hit the register.

My mom could not resist this one for Taz – worth it!

While saving up for life’s events like weddings, holidays and other fun times is one key to avoiding that infamous “borrowing” from your savings (I used to do it too, I kept a running tally of what I took out of my savings thinking that some day I’d pay it all back, when like what, I won the lottery? I was kidding myself), reinforcing your wallet against impulse spending on stuff is another important key for many of us.

Ideas to overcome the impulse

I won’t insult anyone by suggesting you just stay away from Target or only shop with a list (although that works for some), but if you also find yourself spreeing away your extra dollars, try one of these methods to see if you can’t keep it in check.

  • Eliminate the extra cash from your checking account. There’s a reason that happy hour is always busier on payday — everyone feels richer due to the buoyed balance in their checking account. Psychologically, I know that I feel much more spend-y when I have some wiggle room in my account, but if the balance is getting down there, I instinctively think twice about spending on anything beyond planned purchases. Hack your own habit by transferring any money you’re not planning to spend on bills and other planned expenditures before your next paycheck to a separate savings account. You may need to dip into it when things come up you didn’t anticipate, but it may make you think twice the next time a shiny object catches your eye.
  • Give yourself a splurge budget. Whether that’s factoring in that you can’t get out of Target without spending $100, or keeping an extra fifty dollar bill in your wallet that only gets replenished on the first of the month, allowing yourself to partake in the impulse spending — but in a more mindful way — can help to keep it in check.
  • Remember what you’re saying no to by saying yes to the dress/scarf/tote bag/cat costume. This is the trick I used that had me putting the cat clothes back — I somehow had the presence of mind to remind myself that the more money I save today, the earlier I can retire or the more fantastic vacation we can go on next year. Maybe put a post-it note on your credit card or some other physical blocker that can take you out of your emotional/impulsive mind and back to your rational head.
  • Match your splurge. Make a rule that for every dollar you spend on an impulse buy you will match with a dollar to savings.
  • Save your savings. If you’re a sucker for a flash sale or love looking at the bottom of your receipt to see how much you saved at discount stores like Marshalls or TJ Maxx, make a commitment to actually save that money by pulling up your banking app on the spot and moving the “savings” amount into your actual savings account.
  • Put yourself on a temporary spending diet. One way to deal with the fact that impulse buying is our emotional mind overcoming our rational mind is to create a habit, which takes practice. I’ve lost count of how many food diets I’ve tried and while I may stray from the eating plans after approximately 11 days, some of the habits stick over time. For example, now that I know how much sugar is in a pumpkin spice latte, I’ve gone cold turkey even if I do pop into Starbucks for a treat on occasion — I just choose a lower sugar option. By committing to NOT impulse buy for, say, 21 days (the length of time many experts say it takes to create a habit), you may naturally quell the impulse even if you go off your “diet.”
  • Create an email filter for all retail emails to skip your inbox and go straight to a folder. This way you can still get the coupons if you need them, but without the daily nudges to shop. This is another trick I actively use and here’s how I know it works: If I know I need to go to Michael’s to buy something, I look in my “Shopping” email folder to see whatever coupon or offer they emailed me that day, but otherwise I’m not tempted because I don’t see it in my inbox. On the other hand, a few weeks ago, an Athleta email escaped the filter and within minutes of opening the email I found myself pages deep in yoga pants and sweater dresses. Danger zone!

What ways have you found that keep your impulse buying in check? I’d love to know and share them in a future post! You can email them to me or just comment on this article on our Facebook page.