Forget about penny-pinching advice like the Latte Factor. Here’s our take on how to save money sustainably and happily without changing your lifestyle.
Have you heard of the “Latte Factor” approach to saving?
For the uninitiated, the Latte Factor is a metaphor for all the little unnecessary expenditures that we waste our money on, without realising how much they add up to. It’s a simple money-saving method that says all you need to do to finish rich is to cut down on small, periodic, non-essential spending – like the cup of latte you like to have every morning.
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I’m all for careful spending, but frankly, this method doesn’t work for me, and I doubt it will work for many other non-financially savvy people either. Why? Because it works on the premise of deprivation. Unless you’re Scrooge, no one is going to enjoy pinching pennies for years on end, even if the reward dangled at the end of the rainbow is a shiny big pot of gold.
We like our metaphorical lattes. Whether it’s snacks every weekday afternoon or drinks on Saturday night, many of us rely on little perks as “pick-me-ups” to break the monotony of working life. Research reinforces this, saying that it feels more rewarding to indulge in a variety of small, frequent pleasures rather than pouring money into larger, less frequent purchases. Asking us to give up these perks isn’t just impractical and unconducive for our psychological wellbeing; it’s also unsustainable in the long run.
So how then, should we go about saving money? Many of us aren’t disciplined enough to save regularly, let alone force ourselves to sacrifice little pleasures in life and compromise our lifestyles. Is there a sustainable method that can let us save for our retirement nest egg and have our lattes too?
Well, here’s a revelation I gleaned after speaking with several born “savers”: the magic begins in your brain. Think of saving as “paying yourself first”, not reducing the amount of money that you get to spend. After working so hard for your paycheck, don’t you think you owe it to yourself to keep at least a portion of it as a symbol of your efforts?
If you’re having trouble saving money, it’s probably because your mind isn’t 100% on board with the idea of saving. It’s like a mental barrier – if you feel you’re depriving yourself of something, chances are you’re going to feel much less motivated to save (and therefore end up either not saving, or saving very little).
To kickstart a sustainable habit of saving, you have to genuinely want to save, not feel like you have to save. And the key to go about “convincing” your brain is, quite simply, to make saving fun and meaningful.
Here are 3 ways to psych yourself to actually enjoy saving money:
1. Tap on apps
With the prevalence of mobile technology in our lives, saving can be done as simply as a quick transfer of funds from your chequing account to your savings account via your Internet banking app. You can even set the transaction on recurring mode, in case you’re scared you’ll forget to save regularly. That’s fine and dandy, but why not jazz up the saving process so that you derive more satisfaction from it?
For example, you could try using a simple yet interactive budgeting app like Monefy to keep track of your spending and saving. Instead of showing lists of numbers or complicated charts, the app makes clever use of bright colours and fun icons to “animate” your cash flows, giving you just that bit more satisfaction when you see your savings inputted.
Alternatively, add “Save $X” as a recurring task on your calendar or to-do list app. Maybe put it on a Friday, when you’re less likely to be bogged down with tasks. Now, every Friday, as you save $X amount of money, you also get to check off that to-do list. It’s a cheap thrill, but one that works especially well for Type A personalities.
2. Set meaningful goals
It’s always easier to save with a specific goal in mind. Some savers like to keep themselves motivated by constantly visualising their end goals, be it a year-end vacation to the Maldives or a beautifully-decorated new HDB flat. But bear in mind that this isn’t really saving; it’s just delayed spending, which isn’t good for your bank coffers in the long run.
What we’re going to suggest instead is to play with numbers. It may sound unconventional, but setting an arbitrary dollar goal (whereby the number means something to you) can be a fun way of breaking out of your saving rut.
For example, you can start with your current age and see if you have $37 (or whatever amount) saved in your bank account. You should already have more than this amount, so use this “win” as a mental boost to move on to another bigger numerical goal. Or if your birthday falls on 1 January 1978, challenge yourself to save up to $10,178 and leave that sum neatly in your account. Treat it like a work of art – you can look but don’t touch because hey, the number is so pretty!
The trick is to start small, then slowly work your way up.
3. Stock up on necessities and use them as decoration
You might wonder, how can buying and stocking up on necessary goods actually help me save more? Well, this counteractive method is meant for people who don’t save because they just can’t seem to stop themselves from spending.
Think about it – if you really have to shop, why not spend on things that are useful, like tissue boxes or contact lens, instead of frivolous items like clothes or cocktails? By doing so, you “save” the money that would have been squandered on one-off purchases and redirect it towards a better cause: pre-empting your essential expenses for the future. What’s more, buying in bulk usually gets you a discount, which translates to better savings on your groceries and/or personal care items.
Ideally, the necessities you stock should be small, non-perishable, and essential to your daily life. Bonus points if you can organise them neatly or turn them into an aesthetic feature in your house. One of my ex-lecturers, for example, used to stack his Nespresso coffee capsules like Lego bricks to form interesting “coffee sculptures” around his office. Not only did it spruce up his workplace, it also ended up helping him save an additional $3 each day from not buying coffee at Starbucks.
So there you have it – the three different ways you can actually make saving a fun and enjoyable process. Go ahead and give them a try, and who knows, pretty soon you may find yourself asking, “How on earth did I manage to save all these money?”