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How To Spend Less Money

Learning how to save cash doesn’t have to be painful. Here are 7 no-nonsense ways to learn how you can spend less money.

Ramit Sethi

Want to know how to save cash quickly?

There are actually 7 systems you can use to start spending less money today.

Using the systems I’m about to outline can save you hundreds of dollars a month, make you more conscious of your spending, AND make you 1000x hotter to the opposite sex.

But first, the mental model I use to save money…

How to save cash quickly

In classic IWT-style, we’re going to cut through the BS with these cash saving systems. That means no lectures on “keeping a monthly budget” or how you need to “stop buying lunch and lattes every day.” Instead, we’re going to give you actionable systems that you can use that will get you results.

I want you to be able to enjoy the things you love and not feel guilty (while saving hundreds of dollars per year).

Here are the systems to get started today.

Cash saving tip #1: Set a savings goal

Setting a goal for how much you want to save will help keep you focused, increase your chances of accomplishing it, and help you earn money towards the big purchases in life.

My favorite goal setting tactic: SMART Objectives.

SMART stands for specific, measurable, attainable, relevant, and time-oriented, and a good goal will contain elements of all those things.

They are the perfect alternative to all of the vague, aimless goals that we typically set like “I want to buy a car one day” or “I want to be rich.”

Check out these examples of how normal goals compare to SMART Objectives:

BAD GOAL: I want to retire rich.

SMART OBJECTIVE: I will invest X% of my paycheck into a low-cost, diversified index fund until I’m 60 years old.

BAD GOAL: I want a house.

SMART OBJECTIVE: I will put $XXX dollars into a sub-savings account each month until I have enough for a down payment on a house.

BAD GOAL: I want to travel.

SMART OBJECTIVE: I will read Ramit’s article on “How to travel cheaply”, pick a destination, price it out, and learn how I can travel on a budget this summer.

When you get incredibly specific about what you want and know the measure by which to achieve it, you’ll be able to accomplish your goals. It also helps psychologically as now you’re working towards something concrete.

When you put $100 away in your savings account, you don’t think of it as just $100 gone. Instead, you’re $100 closer to a new car. It changes your motivations.

ACTION STEP: Set a savings goal

Ask yourself some questions to help craft a savings goal:

  • Is there something you’re saving for?
  • When do you want it by?
  • How much can you save each month?
  • How will you know you’re on the right track?

Saving with a goal in mind puts all your decisions in focus.

Later, we’ll show you the exact steps on how to automate your finances so achieving your savings goals will be painless and very easy.

For more information on how to craft the perfect SMART Objective for your savings goals, be sure to check out my article on the topic.

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Cash saving tip #2: Leverage sub-savings accounts

Not many people realize this but you might be able to create sub-savings accounts along with your normal savings accounts.

You can use these sub-accounts in order to:

  1. Put money away towards your savings goals
  2. Save cash when you automate your finances

When I first discovered sub-savings accounts, I created one and named it “Down Payment” for a down payment on a house. I was regularly transferring money into it based on my savings goals using my automated finances.

As the months passed, the amount in that account grew bigger and bigger, and I felt really proud of my accomplishment.

During this time, one of my friends was just blindly putting away money in an account he had mentally earmarked for vague goals.

Though we might have had the same amount saved away, the difference between us psychologically was staggering. Where he felt despair about trying to save money, I was motivated.

For me, I wasn’t working towards $20,000 for a down payment. I was working on saving $333 a month over five years — a perfectly achievable goal, especially after I tracked my progress.

Eventually, my friend did open up his own sub-savings account. He told me that doing so changed his entire perspective on saving money for the better.

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ACTION STEP: Set up a sub-savings account (and automate it!)

Go to your bank’s website and open up a sub-savings account. You can even name it to reflect whatever it is you’re saving up for.

Saving up for a car? Name it “New Car.”

Saving up for your wedding? Name it “Wedding Fund.”

Saving up for a solid gold yacht? Name it “Bad Decisions.”

Once you do that, be sure to automate your finances so you’re passively putting money into it each month.

Automated finances are the ultimate cure to never knowing how much you have in your checking account and how much you can spend.

When you receive your paycheck, your money is funneled to exactly where it needs to go — whether that be your utilities, rent, Roth IRA, 401k, or your savings account.

Check out my video below to learn exactly how to set it up today.

Cash saving tip #3: Utilize the envelope system

Want to know one of the best ways to be conscious of your spending? Use the envelope system.

This involves allocating cash for certain things like shopping, gas, eating out, or whatever else in envelopes. Once you’ve used all the cash in the envelope for that month, that’s it. You can’t spend anymore.

Of course, if there’s an emergency, you can dip into other envelopes — at the cost of having less money in that category.

You don’t need to use physical envelopes either. One of my friends who started tracking her spending a while back had a great system: She set up a separate bank account with a debit card.

At the beginning of each month, she transferred around $200 in it. So when she goes out, she spends that money. And when it’s gone, it’s gone. It’s a fantastic system that helps her be conscious of what she spends.

Whatever system you decide to use, you just need to make sure to decide how much you’re willing to spend in each category (and that’s all up to you).

ACTION STEP: Set up your envelope system

You can set up your envelope system in three steps.

  1. Decide how much you want to spend in each major category each month.
  2. Put money into each envelope (ex: $200 for groceries, $150 for eating out, $60 for entertainment).
  3. Spend the money — but when the envelopes are empty, that’s it for the month.

If you set up a debit account, be sure to call your bank and tell them you DON’T want them to allow you to spend more than you have in your account (this is known as overdraft protection). If you don’t do this, you might run into a ton of overdraft fees.

(By the way: If you do slip up and find yourself slapped with some fees, here’s a handy guide for getting them waived.)

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Cash saving tip #4: Use only cash (for now)

Have you ever noticed how much easier it is to spend a lot of money when you’re using a credit card instead of cash? There’s a scientific reason behind that.

Researchers at Carnegie Mellon held a study wherein 26 participants were given $20 to spend. The subjects shopped for products while lying in an MRI scanner (comfy!).

Researchers observed that the area that processes pain actually lit up when the subjects purchased a product with cash.

Whereas purchasing with credit cards was a much more painless process.

From the study:

“Credit cards effectively anesthetize the pain of paying. You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.”

Average performers will see this and think it’s weird or funny. But a Top Performer like you can leverage this knowledge to help save money. Of course, you don’t want to try to use cash forever — it’s just not a smart financial move. How else are you going to score some fantastic travel perks and rewards? But using cash does act as a nice “reset” to help you suss out some of your more vexing habits.

ACTION STEP: Use only cash for 15-30 days

For the next few weeks, use only cash for all of your purchases if you can help it. Of course, things like saving, investing, paying bills, and making rent will be the exception. But when it comes to everything else, just use cash.

When coupled with the envelope method, you might just find that you’ve saved up hundreds at the end of the month. Maybe you’ve been drastically underestimating how much you spend.

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Cash saving tip #5: Pay down your debt

One of the biggest wins you can ever have is getting out of debt. It’s the number one barrier to living a Rich Life and it’s the reason so many people aren’t able to save.

If you want to be able to save more cash, you’ll have to get out of debt first.

If you want to know how to get rid of your credit card debt, I have a fantastic system for it in my article on how to get out of debt fast.

And if you have debt like student loans to worry about, spending more on it to pay it down now will give you more money to spend on the things you love later.

Check out how much you can save by spending more (assuming you have $10,000 in student loan debt with a 6.8% interest rate and 10-year repayment period):

Paying Back Your Students Loans Chart

Even just $50 more a month can make a huge difference.

ACTION STEP: Get out of debt as fast as possible

If you need help, be sure to check out my resources on how to get out of debt below:

I made a video a little while back on reducing debt. Check it out below.

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Cash saving tip #6: Negotiate your bills

Instead of cutting back on the things we love, we can save money on the things we hate paying for. For example, you can negotiate your cell phone, car insurance, credit card interest, and bank fees.

A one-time 5-minute call can save you every month. If you save just $25 on your cell phone bill per month (very reasonable), you’ll cover half your morning lattes for the year — no willpower needed.

It’s simple, too — there are only 3 things you need to do to negotiate with these companies on fees and rates:

  1. Call them up.
  2. Tell them, “I’m a great customer, and I’d hate to have to leave because of a simple money issue.”
  3. Ask, “What can you do for me to lower my rates?

It might seem like they’ll just say no, but I promise you, you’ll be surprised at how easy it is for them to say yes when they know you’ve been a good customer and that you might potentially leave their business because your rates are too high.

For bonus tips on maximizing your credit card savings, here’s a free chapter of my book that covers optimizing your credit cards so you save money on repayments and interest charges.

ACTION STEP: Negotiate your bills

Use the above script to negotiate your bills. If you need more help, here’s a video explaining how to negotiate them.

Cash saving tip #7: Earn more money

Earning more money gives you the freedom to spend more without feeling guilty about buying the things you love.

That’s why my team and I have worked hard to create a guide to help you navigate all the systems that’ll help you earn more money today: The Ultimate Guide to Making Money.

In it, I’ve included my best strategies to:

  • Create multiple income streams so you always have a consistent source of revenue.
  • Start your own business and escape the 9-to-5 for good.
  • Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start blowing up your net worth today.

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