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The Pain of Spending

I read a really interesting article about the pain of spending because Josh and I are trying to put a new budgeting/tracking system into place.  The general idea behind pain of spending is that “the less it hurts, the more people spend.”  In other words, the more inconvenient the purchase, the less likely you are to make it.

For instance, paying in cash is harder than paying with a credit card.  You need to get the cash and carry the cash and count it and hand it over.  That is more work than taking out a piece of plastic and swiping it.  The credit card company mails you the card; you have to go to the bank or an ATM to get the cash.  See, easy vs. hard.

Okay, cash isn’t really that difficult, but businesses are making it easier and easier to spend money.  It doesn’t even feel like real money when you’re talking about gift cards or swiping the phone.  So the article was about making it more difficult for yourself.  Putting a system in place that is enough of a pain-in-the-ass that you decide NOT to purchase something because it will mean doing X, Y, and Z.

I’m not a big spender — my dislike of change extends to not even getting new clothes and switching up my wardrobe — but I was sort of smitten with this idea of introducing pain-in-the-ass tasks in order to curb spending.

But there was a thought that I was still chewing on after reading the article.  George Loewenstein critiques the author’s recording system and points out that it isn’t effective:

It is ineffective, he says, because it focuses on the wrong type of transaction … There are usually more savings to be had from revisiting one’s auto- or home-insurance policy, or one’s phone bill, than from skipping the marginal cup of coffee. Loewenstein said it’s more effective to make changes with larger “one-time decisions,” instead of regularly having to make “all these micro-decisions.”

It’s not the random cups of coffee or the books or the totally adorable wooden duck I bought for myself in Scotland because IT WAS SO ADORABLE.  It’s the fact that we’re probably spending money on services that we’re not really using.  Or paying hidden fees that we don’t notice because we don’t look carefully at the 15 page bill.

Josh and I have started doing an audit of all existing bills, looking at things we can cut.  It will be interesting to see how much we save yearly when we’re done reading all the fine print.  So far, we’ve managed to cut $60.  Maybe not that impressive, but companies make it reeeeeeeally difficult to trim down bills.

How often do you audit your bills and see places to cut spending?  We’re thinking once every six months.

9 comments

1 Charlotte { 09.20.18 at 9:35 am }

I just recently did this with my TV bill. Most providers suck you in with a great limited time deal (usually 12 or 24months) to get your service, but after that expires the rate will go back up. BUT if you call and ask they can usually put another promotion on your account again. If they don’t have anything available I set a reminder to check back in a month or two. And usually a couple times a year I will call and just ask if they have anything they can adjust to help lower my bill, since services and packages change frequently, or ask if I have any add-on services I can remove. A lot of times things get re-bundled and something you have been paying for might be included in another package that makes it cheaper. Same with any recurring bill like auto and homeowners, cell phones, internet, ect. It can be a pain to make all the phone calls, but it can end up saving some money. I use amazon subscription for certain products, and every month I cross check the items I need to make sure prices haven’t gone up or if there is a better deal available, or coupons I am “clip” and add.

2 a { 09.20.18 at 6:13 pm }

My husband is always poring over the bills and complaining about things. We used to get a comparison chart from the gas company about our usage in comparison to our neighbors. We were so far below the curve they couldn’t even make any suggestions to us.

The other thing he does is make sure our savings are growing by harassing the bank for better interest rates. He got them to match an offer from one bank, and then, a couple weeks ago, the bank manager called to tell him about another deal they were offering for almost twice our current interest rate.

One of the most convoluted things to study is your insurance. It seems pretty straight forward for home insurance, for example – you pay this much for your house value and that much for the goods. But if you really look into it, some policies will pay 20% above your house value, so if you’re paying for the actual value, you’re over-insured. But you really have to read over the fine print on insurance to understand what you might be giving up for some savings. We didn’t bother with rental car coverage, because we have more than one car. When I was rear-ended years ago, they didn’t want to give me a rental car because I didn’t have the coverage. However, since the accident wasn’t my fault, we calmly discussed (i.e. yelled at the agent about) how they would be providing me with a rental until my car was fixed. So, pore over your policies and do some internet research, because there might be some savings available there.

3 Working mom of 2 { 09.20.18 at 10:49 pm }

We cut the cord and land line and have local internet that doesn’t change…plus a cheap grandfathered phone plan that doesn’t change…the only bills that could maybe change are car and home insurance but we’ve been with those companies forever and there too much inertia to change (we already get all the discounts and don’t have anything we don’t need)

I would agree that the occasional cup of coffee isn’t the problem but there are people who buy a Starbucks drink every day…3$ every day adds up

4 Lindz { 09.20.18 at 11:14 pm }

We’ve been doing this for about the last year or so… the next big change will be getting rid of satellite and switching to a streaming service for TV. We just need to get through the current DVR backlog and then we can switch which will save about $70 a month. It would be more, but we’re still under contract until August so we’ll have to pay an early termination fee that drops the savings by $20 a month or so.

5 Lori Lavender Luz { 09.21.18 at 10:45 am }

I think such audits are important. I’m pretty good about doing these on an ongoing basis, except for insurance. I really should get on that.

6 Charlotte { 09.21.18 at 12:05 pm }

I forgot one more possible big saver…definitely research gas and electric rates. While you are stuck with your utility provider, you can choose your supplier. BGE posts their current and future rates on their site and google will give you a list of suppliers and their rates. It can be tricky because sometimes there are fees or contract lengths or early termination charges, but I have consistently found a few companies with good rates and none of that b.s. (plus sometimes added bonuses of gift cards for signing up) it’s definitely a fluid thing because rates are always changing, but this info is easily found on your bill. Another thing that can be annoying to do but can end up saving big. And it’s not hard to switch anymore, you can usually just do it online.

7 Ellen K. { 09.23.18 at 11:50 am }

I track our bills daily and use a paper weekly/monthly planner to project our recurring payments and where they fall into our (one income plus erratic freelance) pay periods. I also have a spreadsheet that predicts available spending for each pay period, which I don’t use as often as I should, because I’m a paper kind of person but also because I have too many categories in the spreadsheet.

I love reading about personal finance and could talk about it all day. I totally agree that cutting out small purchases is not as significant as auditing the big bills. But I think the reason why people often like to focus on forgoing the small purchases is that it gives them a sense of control (also, it’s easier for writers to list 12 quick tips!). Personally I haven’t had much success with trying to negotiate better rates for utilities. But habits and reflexes (e.g., Amazon shopping) can be changed, and they can also be tied to your family’s personal values. Switching grocery stores has made a big difference. Declaring the occasional no-spend weekend and giving up Amazon for Lent are also super helpful.

I’m glad you got the wooden duck in Edinburgh. You probably would have always regretted not buying it. There’s a gray area between impulse purchases and intuitive purchases.

8 Arnebya { 09.24.18 at 4:04 pm }

We didn’t do it often, but recently I wanted to change our Verizon service. We were no longer under contract and wanted to see what other plans were available. Once we looked at the bill and realized we were paying so many fees for stuff we didn’t use, we called and changed a few more things. But then we had to complain to get other things removed. It’s not beneficial; I shouldn’t be forced to pay for it. Same with AT&T. Our oldest daughter is in college and the campus wifi sucks. She was using her iPad for homework and didn’t realize she wasn’t connected to wifi (and was probably streaming stuff too, let’s be real). She took us over our data limit and we were charged $15 for an automatic extra amount of data. Um, no. Once the data is used, it’s done until the next cycle. Don’t arbitrarily give me more AND charge me for it. I didn’t ask for it and I don’t want it. And I don’t agree with this big push to have bills on auto pay, then to charge more if you refuse. Verizon gives a $5 discount if you’re on auto pay. I learned my lesson three years ago when they removed my payment twice then tried to give it as a credit to a future bill rather than refund it. No automatic debits.

9 loribeth { 10.10.18 at 7:35 pm }

I have to admit, we haven’t always done this as much/as often as we should… but we have more often in recent years, particularly since we both lost our jobs & then retired, and then when we moved. The first thing I did was go over the budget & see where we could trim (I dropped a few magazine subscriptions, for starters). We both grew up at a time when there was little or no choice in service providers for a lot of things (cable, telephones, utilities), and for the most part, we tended to stick with the service providers & plans we had. (Inertia!)
The move meant calling those providers and in some cases finding new ones, and for the most part, it was a positive experience and we wound up saving money overall. I had no intentions of switching cable companies, but our phone/Internet company offered us a great package deal, & we’ve been quite happy with it since then. Except when the term ran out earlier this spring & they began charging us $90 a month more for the same services(!!). I am generally not someone who haggles, but I called them up & asked for a better deal… they said they had no special deals to offer me & I said I would have no choice but to go elsewhere, as I am a pensioner on a fixed income (true 😉 ). I must have said the magic words, because they transferred me to their “loyalty” department. I’m still paying about $20 a month more than I was two years ago, but that’s certainly better than $90 more…!

I did track our spending for the first 10 years or so of our marriage. I did it MANUALLY (no computers when I started doing it…!), and it got to be a bit of a chore after awhile, although it was pretty cool (& at times eye opening) to see exactly where our money was going. Then dh decided to do it, & he kept at it for about two years. Knowing where our money was going was a big help when first he lost his job and then I lost mine. We knew exactly how much money we needed to run the house every month and how much we spent every month on average. That really helped us realize that we could take early retirement and continue to live comfortably within our means. So far, so good…

(c) 2006 Melissa S. Ford
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