You often hear that millennials can’t afford real estate because of all the avocado toast they eat. I’m here to tell you to eat all the avocado toast you want! A $14.99 brunch is not going to make or break your finances (I am personally known to brunch hard). However, spending money is often linked to how we perceive, and in turn, treat our money. If we are feeling emotionally down, we may spend money to try and compensate. But, if we focus on what is driving our underlying behaviour to fix our money spending habits, then getting that avocado toast (or latte) is completely acceptable.
How does this make sense? Aren’t I supposed to save every dollar and sacrifice everything to pay off my debts and get ahead financially? It depends on what your goals are but I am of the opinion you only live once so may as well enjoy it. The key is being successful with your finances and being happy with your life simultaneously (and not living like a hermit unless of course that’s what you value). This is possible by spending money on things that bring you joy and cutting back relentlessly on things that do not. This article will go into how to do that by focusing your spending, teach you where to cut back without affecting your quality of life, and teach you how to increase your income.
Focus Your Spending
This may sound a bit like Marie Kondo, but spend money on things that truly matter to you and when you do, be smart about it. The trick is to find what makes your life better and spend money on that. A good question to ask yourself is, “will this take away a negative?”
First, create a list of things that drive you crazy or drag down your quality of life. Spend money to solve those problems, and test these changes weekly to find the smallest changes in spending that result in the biggest increase in happiness. For example, I spend more money on being closer to work vs. living further away but the shorter commute time is worth it for me.
Another approach is to write down the things you spend money on regularly that do not bring you happiness. Then create another list of things that does bring you happiness, and rank each on a scale of 1 to 5. By performing this exercise, you identify and remember what expenses make you feel happy or unhappy. So, the next time you swipe your card, you will be able to remember your motive. When you understand what triggers feelings after a purchase, you can reflect and avoid the expenses that make you feel broke, guilty, or afraid and focus on the spending that brings you joy. Over time, cut back or eliminate the expenses that make you feel guilty, and if they are recurring expenses, those cost savings will add up over time.
Here are a few ways to cut back without affecting your quality of life too dramatically:
1) Wait until you need something before you buy it. I used to be guilty of buying things thinking I might need it and then never using it.
2) Cancel any clubs or memberships that do not directly contribute to your happiness and welfare. It’s surprising how many of us keep memberships “just in case.” If you haven’t used it, cut it otherwise you are putting money in other people’s pockets. If you’re thinking of signing up to another membership, see if they offer a trial first before signing up for the long haul. You can use an app like Trim to help you find subscriptions you no longer use and cancel them.
3) Search for online promo codes before online shopping. Most online stores offer promo codes, you need to know where to look for them. Google “coupon codes” and the store you are shopping at to find them.
4) Sell any possessions you haven’t used in the past year. This will likely be one of the hardest things you will ever do (see my article, Why It’s Hard to Let Go of Our Things and How to Bring in Extra Cash).
5) Buy used. Look on Kijiji or eBay for lightly used items. You can often find great deals on art and furniture.
6) Avoid decision fatigue. Research shows that making a lot of decisions can lead to detrimental effects on your finances (see my article, Increase Your Financial Willpower by Making Better Decisions).
7) Negotiate on your cell phone plans, insurance, and bank fees. Shop around and compare prices. Don’t be afraid of asking customer service if they can match another offer and be willing to switch providers if they don’t (see my article, The Negotiating Technique That Can Change Your Life).
8) Look for flight deals using Jack’s Flight Club (in the U.K.), Scott’s Cheap Flights (in the U.S.), and Ydeals (in Canada). The best deal I had was a $450 round-trip through Ydeals to Lima, Peru from Calgary, Alberta! Anything is possible and all three services offer free email subscriptions (see my article, 25 Ways to Travel on a Budget).
9) Consolidate your banking to take advantage of bundle discounts. While some may say spreading your banking needs across different banks is a good idea, save yourself the hassle and consolidate your banking. You will often get various fees waived, such as your annual credit card fees and receive reduced fees on your chequing accounts.
10) Create a visual reminder of your debt. There is nothing like staring your debt figure in the face every morning when you wake up to help remind yourself of where you want to be financially. Put it on your fridge or somewhere you will see it often.
Start a Side Hustle
There is a limit to how much money you can cut back before it affects your quality of life, but there is no limit to how much money you can earn on the side. Whether you call this a side hustle, or a part-time gig, the sky is the limit. The secret to making money on the side is not having classroom knowledge, but going out and doing. Real-world knowledge and the ups and downs that come with it are a far more valuable experience than what you can find in a textbook (or any other book). Determine what your goals are first and then come up with a list of ideas. Consider these questions when you first start out:
- Do you want to make extra cash for a specific purpose? Paying off your debt or going on vacation for example. If so, any side gig that brings in extra cash will help.
- Are you trying to create a sustainable and ongoing source of income that makes a difference in your quality of life? If so, focus on scalable ideas.
- Are you looking to replace or exceed your income from your job? This is the hardest to achieve but is doable if you follow my steps (see my article, How to Build a Scalable Side Hustle for more).
No one goal is better than the next. Even working a few hours a week to bring in an extra $50 can make a huge difference in your quality of life (and can pay for all that avocado toast). You know you want it.
Now that you know how to focus your spending, what to cut costs on for easy wins, and how to increase your income, go out there and brunch hard.
Legal Disclaimer: The views expressed by Mr. Dumont on Money Sensei are solely his and not intended as investment advice nor a guarantee of any financial return. Mr. Dumont is not an investment or tax professional, so the information contained on the blog is not a substitute for professional advice. The contents of this blog are accurate to the best of his knowledge at the time of posting, but rules and laws are ever-changing. Please do your research to confirm that you have the current information.
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