This post may include affiliate links, meaning we’ll receive a commission if you choose to purchase through our links, at no extra cost to you. Please read disclosure here for more info.
Have you ever gone shopping and ended up buying way more stuff than you planned? Or treated yourself to something expensive after a rough day, even though you were trying to save money? Don’t worry, we’ve all been there!
The truth is, our emotions play a huge role in how we spend our hard-earned cash. No matter how much money advice we get about budgeting and saving, actually following through is really tough when our feelings get involved.
Maybe you spend impulsively when you’re bored, stressed out, or feeling down in the dumps. Or perhaps having extra cash burning a hole in your pocket tempts you to splurge on wants instead of needs. We often use emotional spending as a temporary pick-me-up or treat ourselves as a reward.
But giving in to those emotional urges can make it super hard to reach bigger money goals like getting out of debt, buying a house, or building retirement savings. The good news is, once you understand what’s really driving your spending habits, you can take control! That’s exactly what this five step savings framework is all about to help you save more money.
Table of Contents
Why Do We Spend?
We often think we make rational decisions when it comes to spending money. But studies show that emotions play a huge role in what we buy. We tend to spend money emotionally and then justify it with logical reasoning later.
We spend a lot of time talking about how our experiences, our Traumas and emotions affect our relationships in life, but we barely talk about how it affects our spending habits. Emotional spending happens anytime you buy something because you feel some type of way when you’re sad when you’re anxious or even when you’re happy
The problem is, it generally results in buying things that you didn’t really need and when it happens very frequently you might start compromising on your own financial goals. But to be clear, emotional spending isn’t inherently bad, like let’s say if you need a pint of Rocky Road ice cream after a long week or an iced matcha Latte when you’re feeling down all the power to you.
I believe like 90% of goals, like going on a diet fail because the more you hear you cannot eat pineapple pizza, the more you’re going to want pineapple pizza and when it comes to getting better with your finances and money, deprivation doesn’t work.
So instead of telling you to stop spending the money you work super hard for, I’m going to tell you to spend the money but only if you follow this five step saving framework that’s helped me for years.
5 Step Savings Framework : Save More Money Tips
Step 1: Identify Your Spending Triggers
Emotional spending is something we all likely do from time to time without even realizing it. We make purchases based on how we’re feeling at that moment, rather than purely rational decisions. It’s important to understand that emotional spending happens whenever you buy something because of how you’re feeling – whether you’re sad, anxious, happy, or bored. For example, grabbing a cheeseburger after a stressful day at work or buying a random gadget on Amazon when you’re bored counts as emotional spending.
A. Recognizing emotional spending patterns
I’ve noticed that I’m personally most prone to emotional spending when I’m feeling stressed, bored, or lonely. Stress after a tough day might lead me to impulsively order an indulgent meal or buy something unnecessary online as a pick-me-up. Boredom can result in mindless online shopping for items I don’t really need. And when feeling lonely, I’ve spent money on experiences like concerts or events to get out of the house.
B. Personal example:
Treating myself after long work days is something I do a lot. And the One most common pattern I’ve identified is treating myself to purchases after particularly long or stressful work days. Maybe it’s stopping for an extra fancy coffee drink on my way home or browsing online retailers for new clothes or gadgets. In that moment, it feels like a reward which I deserve for pushing through a difficult day successfully.
C. Reflecting on the underlying reasons
However, when I step back and reflect on my spendings, I realise i was constantly stressed and overworked at my job and I’m often using those types of purchases to provide a temporary mood boost or sense of control over a situation that felt unmanageable. The underlying reasons stem from negative emotions like stress, fatigue, or lack of work-life balance.
Since I could rarely control what happened at work, me choosing to buy that bubble tea or cookie or whatever, gave me back a sense of control and a hit of dopamine.
The first step is bringing more awareness to when and why I engage in emotional spending. The key is to identify what’s triggering your emotional spending.
Notice when you tend to mindlessly buy things and reflect on why making that purchase makes you feel happier, more in control, or provides temporary relief. Once I can identify the triggers and patterns, I can start working on healthier ways to cope with those feelings.
Step 2: Build a Better Response
A. Accepting the inevitability of spending triggers
Let’s face it, no matter how hard we try to resist, spending triggers are going to happen. We’re human, and it’s natural to experience emotions that can lead to impulsive purchases. The key isn’t to completely avoid or ignore these triggers, but to have a plan for dealing with them in a healthier way.
B. Creating an action plan for diversionary activities
I realized that my natural response was to buy things to regain a sense of control. I knew I had to change it since it wasn’t sustainable financially, Instead of emotionally overspending when those triggers hit, I’ve found it helpful to have alternative activities ready as distractions. For example, when I’m feeling stressed and tempted to retail therapy, I might:
1. Eat a small candy or chocolate to get that little dopamine boost
2. Make myself a warm cup of herbal tea and take a brief break
3. Go for a quick walk around the block to clear my head
C. Finding healthier alternatives to emotional spending
The idea is to create an action plan of Go-To activities that are free or very low-cost to divert you from emotionally spending money. It takes some trial and error to figure out what works best for your particular triggers. The alternatives should be easy to do in the moment and provide a similar mood boost or sensation you might get from spending money impulsively.
For me, having a backup plan has been crucial. When I feel those emotional spending triggers start, I can pause and consciously choose to do my alternative activity instead of mindlessly opening my wallet or clicking “add to cart.” It’s all about finding healthier ways to cope with difficult emotions that don’t involve irresponsible spending.
Step 3: Automate Your Savings
A. The benefit of forced savings automation
When I was younger and didn’t have much money, it was so easy to spend my whole paycheck because the full amount just sat in my checking account. But I realised having all my money right there was way too tempting – it’s like having a plate of warm, gooey cookies in front of you all the time. You’re eventually going to give in and eat them all!
1. Removing temptation by separating funds
That’s why setting up automatic transfers is key. It’s like having someone come in and hide those cookies in a secret place before you can gobble them up. By automatically moving part of my paycheck into a different savings account, I remove the temptation because that money is tucked away out of sight.
2. Personal example: Adjusting to a lower income
I remember when I went from making great money at my finance job ($120K per year!) to becoming an entrepreneur and only making $60K. That was a huge pay cut! But instead of feeling sorry for myself, I got smart about my spending. I ate out way less, took fewer vacations, and really thought about every purchase.
B. Setting up automatic transfers to high-yield savings accounts
The magic trick is setting up recurring automatic transfers from your checking account into a high-yield savings account. That way you never even see the money before it gets stashed away!
1. The power of compound interest
And here’s the cool part – most high-yield savings accounts pay you interest like 4-5% per year just for keeping your money in there! So that money you automatically transferred actually starts making you more money all on its own thanks to compound interest. It’s like getting a raise without working harder!
2. Recommended FDIC-insured accounts
Later Below, I’ll share some of my top recommendations for safe, FDIC-insured high-yield savings accounts to park your money and earn that 4-5% interest. It’s free money just for being a smart saver!
The main idea here is automating your serious savings by separating it from your spending money. Then you can let it quietly grow while giving yourself a reasonable allowance to enjoy life’s little luxuries without going overboard. It’s the best way I’ve found to stay on track!
Step 4: Dedicate Some “Fun Money”
A. The importance of balance
You’re probably not going to hear this very often, but I really believe it’s okay to spend money on little luxuries or treats every once in a while. Building a healthy relationship with money is all about finding the right balance between saving for your goals and allowing yourself to splurge moderately.
The big problem arises when we act purely on emotions and impulses all the time without any limits. That’s when we end up majorly overspending and sacrificing our financial goals.
B. Creating a “fun money” allowance
So here’s what I do – every month, I dedicate a small, set amount of money as my “fun money” allowance. It could be $20, $30, or an amount that fits reasonably into your budget.
This allowance makes it easier for me to spend money on little wants like fancy matcha lattes without feeling guilty or worried about overspending. There are two key benefits:
- It reminds me that it’s perfectly fine to make the occasional impulsive or emotional purchase. I don’t have to deprive myself completely.
- Since I’m using the fun money exactly as it’s intended, I don’t stress or feel bad about buying something unnecessary. It’s my allocated splurge fund!
- Tracking your fun money.
And if you want an easy, free way to track how much fun money you have left each month, I’ll include my favorite budget template in the blog post resources. This helps prevent going over that allowance.
The main point of Step 4 is giving yourself permission to loosen the budgeting reins a little, but in a controlled, planned way. That daily coffee run or new gadget doesn’t have to be completely off limits as long as it fits into your larger financial plan and fun money! It’s all about balance.
Step 5: Reframe Your Spending Mindset
What helped me the most to save more money is mentally asking myself three questions before I buy anything, question one how many pineapple pizzas does it cost, when I was just getting into personal finance I came up with a rule to reframe money to make it more approachable, so whenever I buy something that isn’t pineapple pizza, I would just think to myself how many pineapple pizzas is this thing worth, how many pineapple pizzas could I buy with this money
Asking three questions before buying
1. The pineapple pizza (or favourite treat) comparison
Instead of just looking at dollar amounts, I reframe costs into something I truly love – pineapple pizza! Whenever I’m tempted by a non-essential purchase, The first question, I think “How many pineapple pizzas is this item worth?”
If a $70 watch catches my eye, and a personal pineapple pizza costs $7, then that watch is the equivalent of 10 pineapple pizzas. This forces me to evaluate if buying the watch is really worth giving up 10 of my favorite treats.
You can apply this trick using any delicious indulgence – hot dogs, fancy coffees, doughnuts, etc. Translating costs into your guilty pleasure makes you rethink mindless spending.
2. Evaluating true value vs. price
Question two, what’s the true value of this?
As Warren Buffett said, “Price is what you pay, value is what you get.” An item’s price tag is simple, but its true value is what you’ll get out of it – the use, happiness, or benefit it provides. Sometimes the value outweighs the price.
For example, if a $5 cafe coffee makes me super productive and beats my afternoon slump, I’m getting way more value than just the $5 price tag. Chances are the True Value that you get from that cup of coffee is way more than the price of the $5, meaning it’s fine to get it, as the true value of how it improves my day is worth it.
3. Considering the cost per use
Lastly, the most important question I ask myself is, what is the absolute price?
When I was broke, I’d always buy the cheapest options like $15 jeans to “save money.” But they’d wear out quickly, and I’d have to replace them, ultimately costing more.
Now I look at cost per use over many years. For instance, a $500 high-quality coffee maker seems pricey upfront. But if I use it daily for 2 years, that’s only $0.68 per cup! Looking at cost per use helps justify upfront costs for longevity.
Now this allowed me to invest in a nice coffee machine for myself years ago. While $500 was steep at that time, knowing the cost per cup would be pennies if it lasted made it worthwhile. And that machine is still brewing! So yeah the CPC is quite less.
Focusing on an item’s cost per use over its total lifespan rather than just the upfront price has been a massive money-saver. It helps avoid buying cheap stuff that falls apart quickly and illuminates when paying more upfront makes sense long-term.
The main point of Step 5 is taking a step back to reframe your spending mindset. By asking myself those three questions, I’m able to cut through marketing tricks and hype to truly assess an item’s value for my lifestyle and budget. It’s all about being an informed, conscious spender.
The Role of Therapy in Financial Wellness
We often don’t realize how much our past experiences and emotions around money can impact our spending habits and financial well-being as adults. If you grew up without much money, you might have built up a lot of financial baggage or trauma that negatively affects you today.
This is where therapy can be really helpful. Working with a therapist gives you tools and strategies to understand and work through those deep-rooted money issues. You can develop healthier ways of viewing and coping with finances.
Maybe you grew up with parents who frequently fought about finances, leaving you with anxieties around money as an adult. Or perhaps you’ve associated spending with self-worth and personal value. A therapist can help unpack those ingrained patterns and beliefs.
BetterHelp sponsor segment
That’s why I’m really excited to talk about the online therapy service BetterHelp. Their mission is to make professional therapy more affordable and easier to access.
Finding a great therapist can be tough, especially if you’re limited to only therapists in your local area. But with BetterHelp, you can get matched to a licensed therapist through their online platform after filling out a brief questionnaire.
I’ll include the link to BetterHelp in the blog post, and if you use that link, you’ll even get 10% off your first month of online therapy sessions. It’s an easy and cost-effective way to start prioritizing your mental health and financial well-being.
The main takeaway for this bonus section is that unresolved money issues from your past can heavily influence your financial behaviors and decisions as an adult. Working through that financial trauma and baggage with a professional therapist allows you to develop much healthier coping strategies and mindsets around money management. Therapy is an invaluable tool on the journey to financial wellness.
Conclusion on How to save more money
So there you have it – the five powerful steps to help you spend more mindfully, save consistently, and feel good about your money choices!
To recap, the steps are:
- Identify your emotional spending triggers,
- Build a better response plan,
- Automate your serious savings,
- Allow a reasonable “fun money” budget, and
- Reframe your spending mindset.
I know firsthand that changing long-held money habits is not easy. But you don’t have to overhaul your entire lifestyle at once. Just start small by really paying attention to why and when you tend to overspend emotionally. From there, you can gradually implement the other steps one by one.
Be patient and compassionate with yourself along the way. The more you practice conscious spending and automated saving, the easier it will become. And before you know it, you’ll be making consistent progress towards your money goals!
If you want to continue learning and getting motivational tips, I’ll be sharing more resources and insights on my blog and email newsletter. Just sign up using the link below to stay updated.
With this savings strategy in your back pocket, you’ve got the tools to break the cycle of emotional overspending for good. Here’s to making your money work for you!
