Is Wealth Just About Changing Your Mindset?

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Money Mindset

Being the personal finance nerds that we are, Johnny and I were reading our latest issue of Money magazine, and it struck up a fun discussion. Okay, truthfully, Johnny read it and then told me about it, and then the discussion ensued. In the Editor’s Note section, it says that “The surest path to true wealth … isn’t a particular portfolio or career strategy, … [but] it’s a mind-set that emphasizes responsibility and frugality, shuns excessive risk taking, and imbues you with the confidence to go against the crowd.”

In much more simple, less-boring terms, our financial well-being has very little to do with money. It’s all about our mindsets. Johnny and I love this because it hits at the very core of why we believe so strongly in sticking to a budget.

When we were fresh out of college, living in New York City, we easily could have spent every cent of our paychecks. SO EASILY. What wasn’t easy was not spending every cent. Sometimes we just wanted to be a normal couple who’d go out to a nice, intimate restaurant, grab gelato afterwards, and then take a cab home. Instead, we kept our food spending within a total of $350/month, which meant one takeout meal a week and maybe one inexpensive restaurant a month, if we were super frugal otherwise. We had to go against the crowd in order to spend (or rather NOT spend) this way. Johnny’s coworkers would grab Starbucks in the morning, a nice lunch and another Starbucks at lunch, and then go out for drinks at the end of the day. Going and grabbing a $15 lunch was the normal thing to do, and Johnny bringing a homemade sandwich or going to grab a $1 slice of pizza was not normal. The same went for all other aspects of our lives. If an activity cost money and wasn’t necessary, we more often than not didn’t do it. Our behavior probably looked odd, even cheap from an outsider’s perspective. And I’ll be the first to admit that it was kind of odd. But our mindset was focused on one thing: becoming debt-free.

So how do you go from spending more than you’d like to having a saver’s or a debt slayer’s mindset? In other words, how do you change your brain? Welp, it’s your lucky day because I just happen to be a former spender. Buying stuff with reckless abandon makes me happy. Or it used to before my mindset changed. For me, the shift happened when we started making long-term goals. Rather than focusing on how much we could save each week or each month, Johnny and I planned what we could save (or pay off in debt) over the course of a year. That was super motivating for me. And all it took was making small, consistent changes in our spending from day to day. Imagining where we’d be if we gave into extra spending (i.e., in the same place and still in debt) was also very motivating. That’s not to say we didn’t have hiccups along the way. But because our mindset had changed, we always got back on track. And even though we’re debt-free and in a place of financial security right now, our mindset still hasn’t changed. That feeling of financial peace and security is super addicting, I tell ya, much more so than any satisfaction I used to get from buying new throw pillows (no offense, my lovely, soft, patterned squares of fluff).

And it’s all done by — you guessed it — making and sticking to a budget. At least that’s how we feel. Do you agree? Do you think the path to wealth (or at least financial peace) is more about a mindset than a financial portfolio or career path (i.e., more $$$$)? Or do they have it all wrong? We’d love to hear your two cents!

Frugal Months

Frugal Months

A couple of times a year, we’ll get to a point where it seems multiple irregular expenses hit all at once. Ouch. Even if we’ve budgeted for these expenses, shelling out that much dough in a short timeframe can be a little unnerving. Other times, we’ll go through a quarter where it seems like our spending has been creeping up and up and up. When things like this happen, it’s time for a Frugal Month in our household.

Hopefully whatever budget/system you’re running allows for some fun or personal expenditures. Few have it in them to get by on only the essentials (read: food, housing, utilities) for an extended period of time for the sake of getting out of debt or saving. Frankly, I don’t think it would be healthy for your psyche or for any relationship you might be in. J & J have talked about splurging and giving yourself personal spending, and I completely agree with their takes. That being said, getting back to just those spending basics from time to time is a good way to right the ship and get back on track as needed.

Frugal months encourage us to focus on just the basics by placing some additional artificial constraints on ourselves. For a limited time, we purposefully cut out the fluff and reduce our personal spending. Here are some examples of things we try to eliminate or reduce:

  • Eating out
  • Going to the movies
  • Clothing/Fun/Discretionary purchases
  • Babysitting
  • Buying music or apps
  • Costco runs
  • Purchasing decor/items for the home

Some may argue that we are just kicking-the-can-down-the-road. We’re eventually going to go to Costco and load up on paper towels, so why put it off until next month? Or we’ve already talked about and decided that we are getting a new area rug for the house, so why wait?

I agree that there will be purchases that are merely delayed, but I think there are purchases that we think will be delayed but really never end up happening: Some cute clothes for the kids? A tool I want to get for the latest project around the house? A new mirror for that empty wall upstairs? I think we’d be surprised at how often we move on from a wanted item by waiting just a few weeks before purchasing.

For those items that you are 110% sure you are going to be purchasing anyways, I still think there is psychological value in temporarily holding off. Tightening the screws across the board is easier and likely more effective than cherry picking (and probably rationalizing) here and there.

Then there are those expenditures that can be avoided altogether. Even though we didn’t go to the movie theater this month, it doesn’t mean we’ll have to make up for it next month; the same goes for eating out and babysitting. By going without, you can re-purpose those dollars to other areas or budget categories that might need catching up or help yourself build a bigger, better buffer going forward. Does that mean we can’t go out to eat at all during the month? Not necessarily (though that would be great). We just try to do it fewer times than we usually would or spend less than what we normally budget for.

Finally, the fact that it only lasts for a month makes it very manageable. Just like that new diet that lasts from January to February each year, we all can do anything for a month! Because it’s short-term, my wife and I don’t feel so bad reminding each other about it when we’re making plans. Could you imagine if I was constantly telling my wife, “Remember, it’s a frugal year, so we shouldn’t….” That wouldn’t last long at all. Seeing that light at the end of the tunnel and realizing it isn’t so far helps us to stay motivated.

So how often do we do this? It seems that it ends up being about twice a year. If we manage to squeeze in a third month, that’s even better, but I think going to once a quarter would be too much for us. That means that two to three times a year, we’re left with an extra $200+ to work with. We don’t really plan out in advance which months will be frugal months. It’s more that we call an audible when we feel like spending is getting a little out of whack. I could certainly see where some might like to plan them out a little more, maybe around months of larger expected expenditures like the holidays or a vacation.

Have you ever tried a frugal month or something similar? What could you cut out during a short-term, financial fast?

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