For those of you who aren’t big Star Wars fans, back when the first movie came out in the summer of 1977, it was surprising to find out that people didn’t pay for goods with cash. Instead, they had “Republic credits,” which were some value that was kept in an account somewhere. At the time, it was shocking that people wouldn’t have any connection to a physical object representing their money.
Now, of course, that has become commonplace. We pay for all kinds of goods and services with credit and debit cards. Money is direct deposited into bank accounts. We may even pay most or all of our bills online. The amount of money we have at any given moment is just a number.
As a human, you’re not just a life-support system for a brain that computes things. Your brain and body evolved to work together to perform actions. You perform best when you are performing actions that have an impact on the physical world around you. It is effortful to have to engage in activities that are purely conceptual.
This is why the highly conceptual banking system we live in now makes it hard to manage money. The goods you buy are more tangible than money. Even when you buy a product online, you see a picture of the object, which is much more specific than the number denoting the cost. In addition, the barrier to making a new purchase is low. Websites have one-click ordering. You just slide a credit card into a slot to make a purchase at the coffee shop. It is certainly easier than doing the math that would be required to keep track of your bank balance.
All of these purchases can easily become habits. A cold brew and a muffin from the coffee shop on weekdays. A new pair of shoes from your favorite website that you browse while taking a break at work. A round of drinks for your friends after a long day at work.
There’s nothing wrong with this. If you’re happy with the amount of money you are saving, then continue doing what you’re doing. But if you wish you had more money at the end of the month, then you’re going to have to make a change in your behavior (assuming that you can’t snap your fingers and suddenly get a raise). Without changing your behavior, you’ll just keep spending as you were before.
Unfortunately, you probably don’t have a great idea of where all the money is going. When anything becomes a habit, you stop paying attention to it. That is the joy of having a habit. Lots of menial tasks from switching on the lights in your bedroom to getting yourself washed and dressed in the morning can be turned into habits you can do successfully without conscious thought so you can devote your attention to something more interesting.
When habits go bad, you have to start by becoming mindful of activities you are performing mindlessly. Tracking your purchases for an entire month is a great place to start. (A month is a good length of time to take stock of what you’re spending, because it’s the usual billing cycle for most people.)
Start by carrying a small notebook and pen that you can keep in your pocket or purse. Next put a sticker on the front of your credit and debit cards reminding you to log each purchase as you make it. Make sure to write down how much you spent, when, and where. At this stage, you don’t have to change your behavior, but if you do opt out of making a purchase after thinking about it more, that is fine.
Each week, look at your purchases, and make sure your spending habits align with your financial priorities. Do you notice any purchases you don’t need to make? Are you spending money on goods or services that you could easily do for yourself? Are there purchases you are making that you might defer to another time? Are you prone to make purchases using one-click shopping that you might not make if you had to go through more effort to complete the transaction?
This process will help you to become more aware of where your money is going. There are many strategies you might try to spend less money, but all of them begin with knowing your spending habits.