As the cost of almost everything increases, how do you align your expenses with your income or budget? This simple money management technique doesn’t require budgeting or technology. You can cut your spending with simply your brain, eyes, and senses. It only takes a minute of your time. Ready to get started?
How to cut expenses
When we engage our senses, we experience life differently. This money management tip taps into the power of your senses to hep you cut expenses.
You’ve probably envisioned a road trip, traveling out on the open road surrounded by tall trees as you pass by. Around each curve, a new image of nature flashes before your eyes.
While picturing that road, what did you smell? Perhaps you smell the fresh air or the pine trees.
At Open Road Wealth Management, we want you to think of your finances like that open road you just envisioned.
Close your eyes and visualize your spending.
Remember that road trip? Now, think about how you are going to pay for that trip.
Once you know how much the trip will cost, visualize the value of that money in your life.
For example, if that trip costs $1,000. Visualize how long it will take you to work to earn the cash to take that trip.
Maybe that trip does or doesn’t seem worth it now.
Visualization is a powerful tool that can help guide financial decisions. It helps in these ways:
- taps into your emotions and senses
- keeps you accountable
- keeps you on budget
- enables you to reach your financial and personal goals
Self-help money management technique that works
This is not an imaginary technique that we dreamed up one day.
It worked for celebrity Jim Carey. He used visualization techniques to realize his dreams.
Jim Carey told Oprah he visualized earning $10 million before he made it big.
At the time, he said he had nothing. He said visualizing being worth millions “made me feel better.”
It was a self-help technique. Here’s how he did it.
“I wrote myself a check for $10 million for acting services rendered, and I gave myself five years, or three years maybe. I dated it Thanksgiving 1995, and I put it in my wallet it and kept it there. It deteriorated and deteriorated. Then, just before Thanksgiving 1995, I found out that I was going to make $10 million on I think it was Dumb and Dumber.”
Are you ready to realize your dreams?
How to reduce costs
You have to “see” where you’re spending all your money to cut spending and reduce costs.
You likely already visualize your expenses, but in a more complicated way than this simplistic money management technique.
In a Debt.com 2023 poll, pen and paper were the top ways people preferred to budget.
We don’t know what drives this consumer behavior, but as financial experts, if we were to guess – visualization might have something to do with it.
With a pen and paper, you have a lot of flexibility. You can move things around, organize expenses in different categories, and borrow a little from this category to make another category on budget.
Perhaps you also have a feeling when you see all the expenses in your handwriting. There’s an accountability and visual impact of seeing everything.
Spreadsheets (30%) came in as the second preferred method for budgeting in the Debt.com survey.
Once again, spreadsheets allow you to quickly move items between categories, make adjustments, and SEE your expenses!
How to categorize spending
To start visualizing your expenses, look at your costs in groups. You have:
- short-term living expenses
- medium spending
- long-term financial goals
Now, let’s get to some examples.
Short term expenses
Short-term living expenses include all the costs you need to live. That includes things like housing and technology.
Now, let’s imagine you’re out shopping and seeing a nice new pair of jeans and a shirt you want. What’s the cost to your bottom line if you spend $200 on new clothes? Think about the value of those clothes in terms of your monthly living expenses. How many cable bills can you pay for $200?
Perhaps it’s worth spending the $200 on clothing because you also visualize how good you will look in that new outfit. When you envision something, you imagine all aspects of it and its impact.
You may be less likely to make impulse purchases. Instead, focus on what you truly need versus what you want.
Medium-sized goals
Medium-sized goals are expenses you know are around the corner. That might include a new car.
You can buy a new one for $40,000 or a used one for $25,000. A used car will save you $15,000.
When you compare the fresh smell of the new car to the ordinary smell of the used car, you’ll probably lean toward the new vehicle. Your senses overtake you until you start to visualize that $15,000.
How much is $15,000? That might be three nice vacations or several mortgage payments. Which is more important? A new car or a used car? You’ll reach your final destination in both cars. However, the used car may give you more value.
You’ll pay less, won’t deal with instant depreciation, and will allow you to save money to enjoy something else.
Long-term goals
Now, let’s consider long-term goals. College is a good example. There are so many options for college. You can take classes online or attend a community college. There are in-state and out-of-state schools. Finally, there are public and private schools. Each college choice has a different financial value.
If you save $15,000 a year if you go to an in-state school, multiply those savings by four years. Over four years, that’s $60,000.
That’s a lot of money, especially when you think about college costs in relation to your long-term goal of retiring. When you retire, $60,000 might be an entire year of income.
Of course, there are other values to various college choices. They all have a financial value. What’s the value to you?
Retirement is another long-term goal. If possible, continue to invest in your Thrift Savings Plan or 401(k). Visualize what that monthly investment will look like in five or ten years when invested in the market, and how that will allow you to reach your retirement goals.
Visualizing expenses helps you make smarter financial decisions.
Know your hourly rate
When you’re considering short-term, medium-sized, and long-term goals, think about how long you’ll have to work to earn the money to pay for that vacation or new car.
Take your hourly employment rate and divide that by your expenses. That’s how long you’ll have to work to earn that vacation. Is it worth it? Or is your money better spent somewhere else?
Get started cutting spending
Start visualizing your expenses, whether it’s a small purchase like new clothing or a large purchase like a new car.
It’s one aspect of mindful spending and can help you cut expenses and potentially earn more money, as Jim Carey proved.
You can apply this technique to all aspects of your life. For example, a life-changing moment like a divorce changes your financial plans.
You will find your new financial road if you visualize your long-term expenses. Start applying visualization to your life to cut spending. You’ll feel differently about finances.
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