Finding the balance between living your best life and paying down debt isn’t easy. But these three spending rules encouraged me to save money and avoid shame spirals from shopping.
The 5% Cash Back Challenge
People love using credit cards and even feel the fear of missing out on rewards and point programs. The reality is those rewards are designed to encourage more spending, which can contradict your efforts to save money and pay down debt.
While many debt-free proponents say you must cut out every unnecessary expense, I found long-term deprivation made my personal finances feel like drudgery. Instead, I implemented my own 5% cash back challenge to treat myself for milestones I made along a longer debt payoff goal.
If you have a large amount of debt – say $100,000 in student loans like many millennials do, then break it down into smaller, more manageable chunks. Then promise to pay yourself back 5% to treat yourself for hitting your goal. For example you can target $1,000 of debt at a time and give yourself a $50 treat, or you can go for $10,000 increments and treat yourself to $500 each time.
An easy way to package up these rewards is to buy yourself a gift card and use it for several coffees or your favorite dessert. Or you can treat yourself to larger experiences like tickets to see a show. A client of mine involved her two kids in the process and drew a big thermometer in their living room. Whenever they paid off $1,000 of debt, the whole family went out for pizza. Soon, the kids were asking how they could help pay down more debt.
Match Your Future Self Like A 401(k)
A 401(k) match is money contributed by your employer to your 401(k) account. For each dollar you save in your 401(k), your employer matches your contribution, up to a certain percentage of your salary.
I started implementing this rule when I observed how many of my money coaching clients contributed to their 401(k)s rather blindly because they wanted to get the “free money” in employer matching, even when they were struggling to pay their everyday bills.
When I became debt-free, it was arguably just as hard to stay debt-free as it was to pay down my debt. I suddenly felt like I could afford more, even though I still wasn’t saving enough for retirement. Before I knew it, I was going back to my old shopping habits and shoe collecting that I had curtailed in order to pay off student loans.
Nowadays, I don’t deprive myself of buying clothes that I want — as long as I am also willing to invest at the same rate that I shop. For example, this month I spent $200 on a jacket that I absolutely did not need, but really wanted to buy. I bought it and then later that week, contributed $200 into my investing account. Having this mental shift helps me really evaluate how badly I want to buy something, knowing it will essentially cost me twice as much in my budget.
I used to view it as as a way to give myself spending boundaries, but recently I’ve put a more positive spin on it: When I buy something for my current self, I’m matching my future self who will get to treat herself, too.
Schedule Shopping Spiral Days (With A Budget)
I’ve always had a hard time with male-dominated personal finance advice because it would often categorize shopping as frivolous, when women drive 70 to 80% of all consumer purchasing decisions. That’s not to say that all of my shopping habits are justified. I’m absolutely guilty of shopping as a form of coping with stress, grief or anxiety, even as a money coach. I’d love to say I kicked that habit, but truthfully, it’s hard to let go of a habit that I actually enjoy.
Rather than restricting myself from shopping, I now schedule a day each week where I’m “allowed” to shop with a specific budget in mind ($250 is my target). That might literally mean a walk around the mall, or carving out a few hours to browse my favorite online shops. I scheduled my shopping day to be Thursday afternoon, after my toughest and longest work days.
This may seem like it actually encourages me to spend more, but instead it’s curbed my impulses to shop the other six days of the week. Even if I have a tough day on Tuesdays, my other long work day, I give myself permission to blow off that steam on Thursdays rather than go on the impulse immediately.
It’s removed the lifestyle creep of many small purchases. My shopping is now more intentional with purchases happening all on the same day, versus scattered throughout the month. This helped me see my purchases relative to each other and keep them within my targeted budget.
80% Success On These Changes Is Good Enough
In my role as a money coach, I’ve learned that most of the guilt comes from the feeling of failure, even on rules that are completely arbitrary. We treat rules as all or nothing. Instead, I adopted the Pareto Principle or the 80/20 rule with a slight twist — you’re allowed to fail 20% of the time and still get 80% of the success.
Giving yourself permission to be imperfect in your spending and knowing that you can still succeed financially will make staying within a budget more manageable, and keep the guilt out of shopping.
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