Saving money in today’s economy is more than just good advice; it is almost essential. With the high inflation and interest rates, it is nearly impossible to continue saving as much unless you change your money habits. Learning to take control of your finances, educating yourself, and installing more sustainable spending habits in your daily life is the way to thrive! Here are 6 things you should not do if you want to cut down your spending and save more.
1. Don’t start your month without a budget
One of the most common mistakes people make when learning to be financially responsible is not budgeting at least a month ahead of time. Estimating your expenses and earned income for the upcoming month can help make you more aware of your finances. Once you calculate your estimated values, you will know better about how much money you can afford to spend on non-essential activities.
So, instead of spending money throughout the month on various activities and with a little leftover for utility bills and credit card payments, you take control by planning your budget ahead of time. You can set spending goals for yourself and not spend beyond what you can afford. Essentially, you don’t spend the money you don’t have. This method also prevents you from spending on unnecessary activities, thus ultimately lowering your expenses.
2. Don’t avoid taking care of your medical needs
According to Bankrate, nearly 1 in 3 Americans avoid seeking medical care due to the cost. Even more, 29% of Americans say they skip doses or cut pills in half due to the inability to afford their medications. The long-term consequences of these actions put people at a greater risk.
To combat some of this, in January of 2022, the No Surprise Act (NSA) was passed to reduce the chances of surprise medical bills. However, if you receive a medical bill you didn’t expect, there are a few ways to negotiate down your bill. Asking for an itemized bill in plain language is a great starting point.
You may find COBRA coverage is expensive if you’re cutting down expenses due to job loss. An alternative to COBRA coverage would be to use a subscription health plan. Members save thousands when they use Mira’s lab test services. Between January 2022 and July 2022, Mira saved members $84,555 on lab tests. Mira’s services also provide up to 80% off of prescriptions. Depending on your needs, there are other subscription-based health plans from Cerebral and K-Health.
3. Don’t splurge to please or impress
A study by the California Institute of Technology and Stanford University found that people prefer wine more after being told that it is more expensive. The study also found through MRI scans of the participants’ brains that they enjoyed the exact wine more when informed that it was pricier.
We often tend to associate higher prices with better quality. As shown by the study above, this association can often be faulty. Planning an expensive vacation or purchasing designer clothing can often lead you towards overdue credit card statements and high-interest payments. In this age of social media, it is hard not to fall into the trap of external validation through splurging. But, not being able to pay your bills and aggregating debt over time is much more challenging.
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4. Don’t forget to cut down on your monthly subscriptions
A recent survey by CNBC found that, when asked to estimate their average monthly expenditure on subscriptions, consumers estimated $86. However, when asked about all their subscriptions and respective costs (shown in the image above), the calculated average was $219. We often underestimate how much we spend on entertainment platform subscriptions.
According to Statista, in 2020, a consumer in the U.S. had an average of 12 paid subscriptions. 51 percent of U.S. adults end up with unwanted or unexpected subscription charges. Researchers found these charges were more common among the younger populations of millennials (born between 1981-1996) and gen Z (born between 1997-2012).
There are a few ways you can put a halt to this and save your money. First, try to eliminate subscriptions that are repetitive or have a similar purpose. Go through your monthly bank statements to see if you have any unexpected subscription charges. If you do, cancel them immediately to prevent yourself from losing another month's payment. You can also try to find collaborative deals between two subscription platforms or pay for an annual subscription instead of a monthly one.
5. Don't overuse your credit card
A Massachusetts Institute of Technology study found that credit card usage activates the reward centers of our brains, whereas cash payments do not. The study also observed that using a credit card "decoupled" the idea of purchasing something and paying for it. Credit cards allow you to postpone payment and maintain a running balance, keeping the cost of the item you bought out of your mind.
Researcher Dilip Soman's journal article concluded that paying in cash/check was a painful process causing people to think twice about their purchases. On the other hand, the ease of use of credit cards and digital payments encouraged people to spend money without giving it much thought.
Credit cards are useful tools because they allow you to make large purchases, build your credit score and manage your money smartly. It is essential to use credit cards thoughtfully because they can also affect your spending habits negatively when misused. A good rule of thumb is to use your credit card for purchases you can comfortably make with cash.
6. Don't forget to automate your finances
Automating your finances means that you set up your credit card and other bills to get automatically paid each month from your savings or checking account. You can also automate your account to deposit a portion of your paycheck into your personal savings account as soon as you get paid. By doing this, you get into the habit of "paying yourself first." This method prevents spending on unnecessary purchases throughout the remainder of the month because a good chunk of your paycheck is now in your savings account.
You can use this technique to help you build up your emergency fund. An emergency fund is a sum of money you set aside for large and sudden expenses like medical bills, home repairs, car accidents, or unemployment. This fund allows you to create a financial buffer when you are hit with out-of-nowhere costs and need more time to arrange for the money. It also prevents you from maxing out your credit cards or taking high-interest loans. Typically, your emergency fund should cover at least three to six months' worth of your living expenses.
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7. Don't use a single bank account
Using both a checking and savings account can go a long way in curbing your spending. When deciding between spending money and saving it, we often want to do what gives us rewards in the present instead of the future. This phenomenon is called "present bias," and research indicates that present bias is associated with overspending behavior.
A great way to get around present bias is to use automated savings. Using both a checking and a saving account, you can create rules to automatically transfer a portion of your paycheck from your checking account to your saving account. This method prevents you from accessing that money in the first place, making it easier to save money for the future.
It is vital to prioritize what you want when saving money. Securing your financial future and building wealth can often come at the cost of fixing unhealthy habits and mindless expenditures. Like everything else, your results will follow once you build the right habits.
It can be tough to change your spending habits, reduce overall expenses, and prioritize your needs over your wants. When accessing healthcare, you shouldn't be forced to eliminate or reduce your plan because of the cost. With a Mira membership, you get excellent care at a fraction of traditional health insurance costs. For just $45 per month, you get access to same-day lab testing, discounted prescriptions, and urgent care.
Girisha is a second-year graduate student at Columbia University, pursuing a Master's in Public Health. She is excited to combine her passion for Public Health and writing with the hopes of delivering quality health information, one article at a time!