Money Psychology Tips


The mind is a powerful thing. I’m slowly getting back into exercising now that Baby Girl is seven weeks old. It’s incredible just how hard it is to get back in shape after months of doing nothing more than walking at a brisk pace (and “brisk” is a relative term by the end of a pregnancy). But it’s not the first time I’ve had to get back into the swing of exercising. And the key to making it work is always the same: mind over body. I have to take control and ignore those thoughts telling me, “Hey, you know what? This isn’t fun!” or “Whyyyy are you doing this to yourself?”… or the loudest of them all “STOP. STOP. STOP. STOP. STOP.” I have to look at the big picture and remember why this horrible, awful, terrible thing called exercise is actually worth it in the long run.

And so it is with changing money habits as well. When Johnny and I first started keeping a budget and paying off our debt, I would find myself thinking, “This is taking all the fun out of my life! Johnny hates fun! I married a fun hater!” And, I’ll admit, budgeting and paying off debt wasn’t fun in the beginning. It wasn’t until we started to see the difference in our savings and school loans that it became easier. Something that also really helped was using any and all psychological boosts we could. After all, one of the greatest keys to taking control of your money is changing how you think about money.

So here are three of our favorite psychological kicks-in-the-pants when it comes to budgeting and paying off debt.

Paying With Cash

The idea behind this one is pretty simple: when you spend cash, you spend less of it. Rather than just swiping a plastic card, you’re forced to see actual cash leave your hands. Johnny and I did the cash-only method for the first few months when we started our budget, and it definitely did its job. Let me tell ya, spending $100 on groceries hurts a lot more when you are giving the cashier FIVE $20s instead of a plastic card. Let the power of money work harder by spending with cash.

Debt Snowball

Boy oh boy do Johnny and I believe in the Debt Snowball Plan. All hail Dave Ramsey! That’s one of the things you have to say when you join the Ramsey Cult. Kidding. We used this method through our entire process of paying off debt. Our school loans were broken up into four separate loans. And despite all logic, we did as the plan recommends and started with the smallest loan amount, not the highest interest rate. Johnny and I paid that smallest one off in just a couple months. And even though we still had a long way to go, we felt so freaking awesome about our achievement that we couldn’t help but keep pushing that big ugly snowball. And so while we might have lost a little bit of money in extra interest, we could have lost a lot more if we had gotten discouraged at seeing such little progress on our larger, higher interest loans. If you’re paying off multiple debts, Johnny and I highly recommend this method if you need that extra umph! to get you going.

Pre-Paycheck Savings

When money is taken out of our paychecks before we see it, we really don’t miss it as much (or at all). After all, we never even saw it. Very clever move there with our taxes, Uncle Sam. Very clever, indeed. But we can also take money out that actually helps our finances! If you have a hard time saving, have a certain percentage automatically put into a savings or retirement account before you see it. One of the obvious options is through a 401k, which Johnny and I do, but it could be any sort of savings. You can’t spend something you never see in the first place (or at least it makes it a lot more difficult!).

So those were the boosts that have helped our finances along the way. It’s hard to save and pay off debt, so it’s nice to know there are a few totally legal and legit tricks to make it easier. Have you ever used any of the psychological boosts we listed? Do you have any other favorite money mind games to share?

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  • Reply Laurie @thefrugalfarmer February 25, 2013 at 7:19 am

    Great timing on this post, Joanna! We are in month two of our debt payoff and have encountered some of these battles this month! The psychological trick that has helped the most thus far has been imaging our life without debt: the things we can do, see, give, that we can’t right now. We’ve got visuals such as charts and graphs plastered all over the office, which helps too. You’re so right about how one of the greatest keys to taking control of your money is changing how you think about money. Without that, you’re most likely fighting a losing battle.

    • Reply Johnny February 25, 2013 at 10:59 pm

      When we started our debt payoff, I was obsessed with our debt snowball spreadsheet. And similar to you, I had it printed out and plastered on our office wall. It’s so important to knowing that there is an end and it’s possible within a finite period of time.

      The first couple months are the hardest, so congrats on month two!

  • Reply Rob February 25, 2013 at 7:39 am

    Back in the day, when we were young like you guys and first married, we tended to not pay by cash but instead use only one credit card – which we always paid off in full each month (so in a way it was like paying by cash). The reasons for this strategy, besides those which you note when paying by cash: it was an easy way to establish our credit history and, being a cash-back rewards credit card, each December near (expensive) Christmas time, we would receive a nice cash-back rewards credit on our credit card statement – just in time to help pay for all those added expenses around that time of year.

    We didn’t know about Dave Ramsey back then but we also tended to do similar things as he suggests. At that time, after taking out a mortgage on our first home, I calculated on a spreadsheet how each monthly payment would impact the outstanding balances on both the principle and interest. That way we tracked our progress. At first it was tough as most of each monthly payment went to pay mostly interest and little to principle. That said, however, over the years we accelerated our payoff strategy by making yearly pre-payments on our mortgage. From doing that we were able to see exactly when the full amount would be fully paid off – which was 10 years (instead of 25 years) later, Now you may not have a mortgage but you can use this same strategy to pay off other long term debt that you may have. Just seeing that final payment target date move closer and closer, faster and faster, was a great incentive to us.

    • Reply Johnny February 25, 2013 at 11:12 pm

      The cash only method lasted a few months, but now we’re on a somewhat similar credit card system as you used to use. And then with our debt payoff, we also accelerated our payments as time wore on. And while it wasn’t as substantial an amount as a mortgage, knowing that we were not only surviving, but thriving as we threw more money at our debt felt amazing. It was the extra psychological boost that helped us make up the difference for the months we slowed down early on.

  • Reply Brian February 25, 2013 at 8:01 am

    I am the opposite… If I have cash I am much more likely to spend it. When I have to use a credit card I feel guilty about it. I realize I am in the minority for this, but it is just the way I am wired.

    I am a big fan of the pay yourself first thing and you can take it a step further by putting all raises and bonuses into a tax-deffered account. Same idea, you have been living fine without it and you will never miss it.

    • Reply JMK February 25, 2013 at 10:09 am

      I’m with you Brian. At this moment I have 14 cents in my wallet and no intention of taking any cash out of the bank. Our spending for the next 12 months is clearly laid out on my spreadsheet. When I swipe my CC to fill by gas tank this week I’ll just replace the $45 estimated weekly amount on the spreadsheet with the actual amount. The balance remaning (like an old fashioned check book) will update with my remaining balance. It may have gone on the card, but as far as I”m concerned it’s spent and gone.
      I know I have $45 and $180 for groceries. Handing over cash or a CC doesn’t change the plan. I still need to fill the tank and I plan the week’s meals around the sales in order to stay within the budgetted amount. If gas prices were unusually high, I put in the planned amount which won’t fill the tank, and then I work from home one day to eliminate 20% of my weekday commuting (very fortunate to have an office with a flexible work from home policy). I pay off my card weekly – it’s much easier to cross reference my spreadsheet to what’s been processed on the CC website when you only have a few items for the week rather than a month’s worth to review. If I do decide to make an unplanned purchase I think long and hard about it. Then I have to physically add a row to include the unscheduled item. It’s a bit of a game with me to see how long I can go without adding any rows!

    • Reply Johnny February 25, 2013 at 11:16 pm

      It’s funny how personal finances always seems to prove just how “personal” it actually is. I look at cash in my wallet as emergency money. But I similarly feel the pain when I swipe plastic because I know it’s going to track the expense via printed statement, online statement, Mint, etc. So basically I’m always afraid to spend money. 🙂

  • Reply Grayson @ Debt Roundup February 25, 2013 at 9:00 am

    Oh no, you are apart of the Ramsey cult…….I think paying in cash has some powerful effects. I don’t use the snowball method, but I think it is powerful when used. I always agree with paying yourself first.

    • Reply Johnny February 25, 2013 at 11:20 pm

      Dave Ramsey helped put us on the right path, but I don’t remember the last time we read his book or listened to his show. It’s probably time to brush up on his baby steps and chant his name in candlelit circle. 🙂

  • Reply Lacy @EarnVerse February 25, 2013 at 9:06 am

    I know the ol snowball goes against logic, and that it makes better mathematical sense to use the avalanche method (highest interest rate first), but studies have actually shown that paying off small debts first is a better predictor of getting out of debt and staying out of debt. Personally, I think any method that works for you is a good one.

    Love that you address the psychology of spending. This is one of the most important things that people don’t always address. How we treat money isnt always logical. I’m currently reading a great book that gets into the psychology of investing that is definitely worth checking out: The Most Important Thing by Howard Marks.

    American Marketing Association Study:

    • Reply Johnny February 25, 2013 at 11:23 pm

      Thanks for the recommend! Always looking for a good reads. And that study is fascinating. For us, it really was so important to feel that first bit of success. It was addicting. We wanted to feel it again. Had it taken a year or so to crack that first HUGE loan, I don’t know if we would have stayed true to the course.

  • Reply John S @ Frugal Rules February 25, 2013 at 9:10 am

    We pay with cash as much as we can It hurts to hand over that cash while just swiping a card can e done almost mindlessly and you don’t “feel” it until the bill comes. When it comes to debt, I would tend to prefer paying the highest rate first to knock the highest interest amount out first. That said, as long as you’re paying off debt that is what matters most in my book.

    • Reply Johnny February 25, 2013 at 11:25 pm

      Now that we’re better stewards of our money, I think we’re disciplined enough that we would pay off our highest interest loan first. But we really needed to just make progress and feel success early on in order to keep our momentum and enthusiasm for debt butt-kicking alive.

  • Reply Do or Debt February 25, 2013 at 11:00 am

    Nice tips. I like to treat myself to something small if I am good all week (like a latte, hehe) and I love using cash. You see it slipping out of your hands so easily and then when it’s gone, it’s gone. I also have the urge to spend any “additional income”, but I’ve trained myself to just throw it at debt. I think, “well, I wasn’t really expecting this money, so I can do without”.

    I try to make it a game to see how many free/cheap/low-cost things I can do, eat, etc to have fun. Creativity is born out of need!

    • Reply Johnny February 25, 2013 at 11:27 pm

      Haha. I like your free/cheap/low-cost game. We sometimes “play” that without realizing. I’ll look back on a week and realize I mooched free office food the entire week without spending a dime. Always a win.

      And we believe in small rewards, too. If we hit a goal, some frozen yogurt or a cheap date night is always a worthy reward.

  • Reply Stephen at SE February 25, 2013 at 11:51 am

    Awesome Post. I think the psychology of money is way underrated! We actually still use the envelopes for groceries for entertainment (and have for about 6 years). We do almost everything else through mint or ING but we still use our cash in those two areas.

    I can relate to the baby part too! My wife and I just had our first girl 10 weeks ago and we are trying to figure out how to merge our old running and exercise habits with the new addition.

    • Reply Johnny February 25, 2013 at 11:30 pm

      Way to stick with the envelopes! We tried to do it for a while, but we never remembered to bring the cash with us and then it was always weird breaking change for them and putting aside the money we “spent” with our cards.

      Congrats on your girl! You’ve got a three week head start on us.

  • Reply Holly@ClubThrifty February 25, 2013 at 12:13 pm

    I am very motivated by numbers so I don’t really have to trick myself. I do subscribe to the “pay yourself first” philosophy first and I suppose that that’s sort of a trick. I like to put my money out of reach so that I forget about it.

    • Reply Johnny February 25, 2013 at 11:32 pm

      Forgetting about money is the most effective strategy for me, too. In fact, if and when I get rich, I’m just going to pay someone to hide $20 bills all over my house (pants, couch crevice, random drawers) so that I constantly get the joy of finding my forgotten money.

  • Reply HappyFund February 25, 2013 at 12:54 pm

    Here’s one that I’ve convinced HFGF (HappyFund Girlfriend) to follow: when you receive a large financial windfall, spend 1% of it on anything you want. Just get that craving to spend out of your system.

    • Reply Johnny February 25, 2013 at 11:34 pm

      I love that! We might be stealing that from you. We might even adapt it to allow ourselves to splurge 2% or 3%, but that’s a great way to “reward” yourself while putting away the lion’s share.

  • Reply My Financial Independence Journey February 25, 2013 at 1:46 pm

    I make my budget based on one paycheck (out of two per month). The other paycheck is routed directly to savings. Since I’m paid biweekly, I’ve obviously “forgotten” about two paychecks. I didn’t forget about those, they’re also sent directly to savings if at all possible.

    • Reply Johnny February 25, 2013 at 11:35 pm

      That’s a great system. I think we’re able to cover our expenses with two of our four paychecks right now. I’d love to try something similar. Thanks for sharing!

  • Reply Jacob @ iHeartBudgets February 25, 2013 at 3:24 pm

    We used the snowball, and it was fun (for me at least. I don’t think my wife thought “paying debt” was fun. Ever.) Now we have one debt left (student loans). We also used cash for the first year of our marriage, and allowed us to live (and save thousands) off only $14 an hour. Every now and then we spot check our grocery budget by going cash-only for a month. I also have a 401k, and just doubled my investment with my raise this year. I’m also going to start automating about $200 a month to our “savings buckets” account for our savings categories (vacation, birthdays, Christmas, etc.) If I don’t see it, I can’t spend it 🙂

    • Reply Johnny February 25, 2013 at 11:38 pm

      I thought it was fun, too! I loved getting into our Excel spreadsheet and updating it every month. And to think Joanna thought I was a “fun hater”… psh.

      I’m a big fan of sending raises straight to savings/retirement/investments. Don’t even tempt yourself by seeing it.

  • Reply Brick By Brick Investing | Marvin February 25, 2013 at 3:29 pm

    The psychological boosts I use is very similar to yours although I use the opposite. If i’m not struggling and it’s easy, then that means I’m not pushing myself. That goes with being a father, husband, money, and exercise.

    • Reply Johnny February 25, 2013 at 11:39 pm

      Good advice. It’s probably about time to start pushing ourselves and feeling the burn in a lot of areas, including our budget. We’ve been coasting a bit the last two months with our new Baby Girl, but it’s time to crack that whip.

  • Reply anna February 25, 2013 at 3:53 pm

    I agree with the pre-paying – I also do this will bills and anything that I have to pay for during the month so that all I’m left with is a small budget for food/gas/etc. I agree it’s like working out – I do it in the morning to get it out of the way. Congrats on the little one!

    • Reply Johnny February 25, 2013 at 11:41 pm

      Usually on the first day of the month, I go ahead and enter all of our fixed bill-payments in, leaving us with our non-fixed bills (water, electric) and our “Everything Else” category. It’s nice to just lay out all of those necessary expenses first and then see what’s left.

      Thanks, Anna!

  • Reply Mrs. Pop @ Planting Our Pennies February 25, 2013 at 6:02 pm

    I never really thought the psychology stuff worked for Mr. PoP and I. We’re too data driven. Intentionally over-paying on interest via a debt snowball would have driven me batty. Must… optimize… solutions!

    • Reply Johnny February 25, 2013 at 11:43 pm

      Haha. You data people… way too logical. My last math class was as a junior in high school. And Excel? I open it maybe once a year. So data ain’t my thing. I think it’s cool, but I just let other people fiddle with it.

  • Reply Sara February 25, 2013 at 7:52 pm

    We switched to cash only in August and have noticed a major difference in our spending habits. We also usually have more money left over at the end of the month because of our zero based budget. We are also utilizing the debt snowball BUT were breaking rank with one of our loans because of the ridiculously high interest rate -15% on my boyfriend’s car loan. We’re paying it off this month and I couldn’t be happier, literally want to shout from the rooftops! We plan on using the $300 payment to really get our snowball rolling!

    • Reply Johnny February 25, 2013 at 11:47 pm

      YAAA!!! That’s awesome on the car loan — congrats! And what an awesome way to get started with your snowball. In hindsight, we kinda cheated on our snowball because I took out a subsidized government loan with 0% until six months after graduation for the sole purpose of paying off Joanna’s unsubsidized high interest loan. So technically, we did pay off our highest interest loan first. But after that, we worked our way from the smallest amount on up.

      Congrats again. We love hearing a good debt payoff story in the making.

  • Reply Chris February 26, 2013 at 2:14 pm

    I usually pay in cash. In fact, I carry around a wad of cash along with my business cards for some reason. I hate wallets… Anyways, while I was reading your post it dawned on me that I spend an exorbitant amount of cash on tips. Like this Saturday, a couple of friends and I went to this new brewery after the UFC fights to have a few beers. I bought the table 2 rounds and paid in cash. When he brought me my change I always immediately tipped him instead of waiting for the end because I’m never sure when our waiter will get cut, and I don’t want them to give me great service without a tip. But since I tip immediately I just usually hand them a handful of bills and say here that looks good. I tipped the guy $20 total for 2 rounds of $3 dollar beers. Which is only $24 bucks total! When I pay with my card I always take the time to do the math and tip the proper 15%-20%. Eureka!

    • Reply Joanna February 27, 2013 at 12:26 am

      Sounds like cash isn’t always the best way to go for you!! Holy cow, that was a lucky waiter last Saturday. I’m instating a rule for you, Chris: if you’re buying the drinks, you are no longer allowed to pay or tip with cash, ya hear me?! 😉

  • Reply Timothy Mobley February 27, 2013 at 12:51 pm

    Another great post from you guys! First of all, I completely agree with you analogy and comparison of exercise and being money conscious. I often compare budgets with dieting too 🙂 Anyways, I have heard from many clients that paying with cash is one of the most useful and practical tools that helps them stay within budget parameters. It really makes sense because usually it is the “small” items that end up adding up… $10 bucks here, $20 bucks there and before you know it, you are $500 over budget for the month. Paying for the small extra with cash is helpful to be more mindful of what you are actually spending.

    • Reply Johnny March 1, 2013 at 12:40 am

      Thanks, Timothy! Joanna mentioned that we haven’t done the cash system since our early get-outta-debt days. BUT, you’re spot on with the small purchases being the ones that add up. And I think it’d actually be worth bringing it back for smaller purchases in our Eating Out and Everything Else category. Thanks for the comment.

  • Reply Shannon @ The Heavy PUrse February 27, 2013 at 3:58 pm

    Great tips. They can make a big difference in seeing debt disappear. I also find making it a game – like see how much under budget I can be – helps too. Especially when baby girl gets bigger. I play this game with my kids all the time. Let’s see how much money we can save on our electric bill, etc.

    • Reply Johnny March 1, 2013 at 12:47 am

      Now that’s my kind of game! That’ll be the first game Baby Girl ever learns about.

  • Reply Johnny Moneyseed March 7, 2013 at 1:32 pm

    I really don’t like Dave Ramsey, but he did help us out of debt. His ideas of what to do when you’re out of debt are bizarre though. Why would I pay off my house early that has a 3% APR mortgage when I can make wayyy more than that in the stock market??

    • Reply Johnny March 8, 2013 at 12:00 am

      He’s a big part of our get out of debt story, but that’s about the extent of it. I haven’t listened to or read his stuff since getting out of debt. I think he really he over focuses on those likely to relapse into debt. Which is fine, but that’s not us. We learned our lesson.

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