How to Stop Wasting Money: Ways to Trick Yourself into Spending Less

We know that to reach our financial goals, we should grow savings and be mindful about spending. But we don't always have enough willpower to stick with the budget or don't realize that we spend too much money on things we don't need and could easily live without.

You can easily overcome the lack of willpower by automating contributions to your 401(k) plan but you also need to work on your mindset regarding spending and saving money. Here are a few tricks that will help you stop wasting money and accelerate your savings.

See the True Cost of Money Leaks

Money leaks are small expenses that add up over time. Spending twenty dollars a month on a premium video streaming service doesn't seem like a big deal. You may even subscribe to an additional streaming service for just $15 so you have a greater variety of shows to watch.

But if you look at recurring costs over time, it becomes a much bigger deal than you thought. That twenty-dollar subscription will cost you $220 a year. Both of them will be $420. Paying for a plan with unlimited internet that costs $30 on top of a regular wireless plan, so you can watch your favorite shows even when you are away from home, will add another $360 a year.

You can go further and see how much your money leaks will cost you over longer periods of time. If we use the same numbers, in ten years, watching TV shows will cost you $7800. It may be worth it to you or you may realize that you are totally fine with using the internet moderately and having just one non-premium video streaming service that costs $10 because it will save you $6600 in the long run.

Always think about how much things cost you over time and decide whether the value you are getting is worth the money. Consider whether you will benefit more if that money goes towards your financial goals. Developing this mindset will make you think very differently about recurring costs, such as subscriptions and financing.

Before Making a Purchase

Before you buy anything, think about how many hours you will have to work for it. But first, learn your true hourly wage.

How to Calculate Your Real Hourly Wage

Whatever your earn per hour, the portion you get to keep is much smaller than you think. If you are interested in figuring out your real hourly wage, read this article. But for the sake of simplicity, you can estimate your true hourly wage very roughly. Here is an example.

Let's assume that your nominal pay rate is $25. A nominal wage is the pay rate your employer compensates you for your work. You will need to pay taxes from your income, of course. At a 22% average tax rate, it will leave you with $19.50, and if you are paid for eight hours a day, you will earn $156 a day.

Now, you need to deduct all expenses that are directly related to obtaining that income. Let's say your expenses are a $15 lunch and the commute to and from work that costs you ten dollars. After expenses, your daily income is $131.

Although you are paid for eight hours a day, you spend more time earning that income. Include the time you prepare for work and the duration of your commute. Let's say that the official work hours, your commute, and preparation for work consume 10 hours a day. This means that your take-home pay is $131 for a ten-hour work day or $13.10 an hour.

Next time you are about to splurge, think if you want to work that many hours for it. Suddenly, night-outs seem like a lot of work. An extra hour at work for a silly in-game purchase is outrageous. Working a whole day for a sandwich press, which you are never going to use, is out of the question. Even the Pumpkin Spice Frappuccino isn't as exciting.

Hire Yourself or Pay Yourself for Inconveniences

Paying for convenience to save time and make your life easier is totally worth it. As long as you are using the saved time for something productive. But we are not always using time wisely or delegating boring tasks to do something meaningful instead. We often spend money simply because we don't want to do something, even if we have plenty of time on our hands. Think about tedious work or inconveniences as side gigs.

If you don't mind earning some additional cash, instead of paying someone else, consider paying yourself for doing tasks you don't like or for being inconvenienced for a certain amount of time.

Personal story time. I was returning from a trip and landed at the airport during high congestion. I was tired and wanted to get home quickly, like many other passengers who were stuck in planes waiting for a long time to disembark. The taxi service was in demand and the fare prices rose. The Uber app let me know that my ride home would cost me a bit more than $80, which was almost twice as more as usual. A train ride was $2.50 but the commute was more than an hour longer than taking a cab and it was not as convenient.

I knew that I will be too tired to do anything useful when I would get home, the saved time will be spent watching YouTube and zoning out. I decided that I can do both these activities on the train and pay myself $80 for an hour and a half of inconvenience, which instantly felt like a sweet deal. And I didn't even have to pay taxes on this income. A penny saved is a penny earned.

Think of Your Walk-Away Fund

A walk-away fund is a money saved that can provide an out whenever you want to quit a dead-end job, move out from a bad neighborhood, leave toxic relationships, or leave behind anything you hate about your life. Before spending on frivolities, think about your walk-away fund and see if you would rather use the money to grow it. If you don't have strong aversions to anything in your life, it doesn't have to be a walk-away fund. You can focus on growing your emergency fund or focus on your other financial goals. The goal is to motivate yourself to save more money and prevent impulse purchases.