The Simplest Budget/Savings Plan Ever!

Transform your finances
While I do track my spending with things like Mint.com, there are really only two saving/budgeting ideas that I actually follow these days.

The reason that I only use two principles is because it's simple. I know myself, and if it's simple then I'll be more likely to follow it. Honestly, things like clipping coupons seems like too much work to me to do on a regular basis. Don't get me wrong, I will look for the best deal on a new computer or kitchen knives, but those are one off purchases, not regular routine.

The Stranger Test

When you are thinking of purchasing something, imagine a stranger holding the item you are thinking of buying in one hand, and the cash equivalent in the other. Which one would you take? Or what if they were holding a piece of clothing you liked and $80 in the other hand? Seems like a simple enough method to me.

Recently I started a new job and found that the lunch options nearby were both terrible and expensive. Basically, I found that I would spend $9 per day on a mediocre sandwich or $14 on a lunch that I would actually enjoy. But you know what I like more? A stranger handing me $9 per day to make my own damn sandwich! And that's the story of how I started bringing lunch to work!

I also think it's very important to use a stranger in this scenario, if you imagine your shopaholic friend holding out those new sneakers they will probably try to sway you one way or another. Or if you imagine a tree or an alien offering you those things you'll probably be like "oh shit, a talking tree. I have to get a video of this on my phone.".... Well, I guess you could just pretend each option is sitting on a chair, but the "chair test" doesn't sound as good...

Saving Strategy

I was saving a good portion of my income for a long time but I didn't really buckle down on it until I read this line over at Financial Samurai:

"If you don't find it painful saving money, you're not saving enough."

That was when I really thought about saving more. I thought that if I was saving 20% or 30% of my income then I was doing great, but if it wasn't a struggle then why wasn't I saving more? Where was that extra money going? I didn't have a really good answer for it so I decided to crank up my savings to the point where if I wanted to buy something out of the normal, I really had to give it some thought.

The One Strategy That Explains Both (I just came up with this while writing)

Now that I write this out, both of them fall under mindfulness. Mindfulness is a concept of focusing your attention and awareness to whatever is taking place. If I really think about each spending decision it helps me realize the value of each option. When I can use mindfulness to reduce my spending I can also increase my saving with those same actions.

I guess I really only use one principle for both saving and budgeting: Mindfulness!

It's interesting for me to see the rabbit holes of my own mind by simply writing things down. This is exactly one of the reasons why I write this blog.

 
Photo by Zee: Pak Ou Caves - Luang Prabang, Laos

56 comments:

  1. YES! Love that stranger test!!! For some reason I've only thought along those lines like once or twice in recent memory, but I agree getting into the habit of it is CRAZY good for your finances... Literally putting this on a sticky note right now so I don't forget it again - great tip!

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    1. Yeah, I really liked the stranger test when I first heard it. So simple yet so effective!

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  2. This is an interesting strategy. I'm glad that I'm aware of it now. Thanks!

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    1. Now you just have to try to put it to use!

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  3. Awesome. I do the same thing, but I never had the label for it. This is a great perspective. I'll take the $9 and make my own damn sandwich too!

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    1. Making your own lunch instead of buying a lunch every day might be one of the most powerful savings tools I know. I wish I discovered it earlier.

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  4. Thanks, I don't think I've ever heard the stranger test articulately described. Now to go use it!

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    1. You're welcome Sam! Let me know how it works for you!

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  5. This is brilliant. I've never heard of this before, but visualizing the cash equivalent is so powerful!

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    1. The simpler it is the easier it is to use. If you make things complicated you're more likely to not use them.

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  6. I've actually had to use a variation on this method to keep myself from tipping over from "frugal" (smart, strategic spender) to "cheap" (tips over into the obsessive or unwise) -- specifically, with looking for the lowest gas prices. I was going a few minutes out of my way to save 5 cents a gallon, and one day I realized that if I could pay a stranger 60 cents to drive those extra few lights for me I sure as hell would! I no longer drive out of my way to get gas...I just obsess over the lowest of the gas prices on my normal commute, which are usually pretty good anyway.

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    1. Ha! I know what you mean about gas prices, it all depends on if it's worth your time or not. I used to commute about 80 miles per day (something that I'm very glad I don't do anymore), I always got gas at the same place because it was the cheapest place on my route. I spent so much time in my car that you couldn't pay me to spend more time in it so cheaper gas that was out of the way was definitely not an option.

      I think the difference between "frugal" and "cheap" might be defined by how badly you might need that money you save. If you can barely make ends meet then saving that extra money to get cheaper gas might still be "frugal", but that little bit honestly makes no difference then it might be "cheap".

      Thanks for stopping by!

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  7. When I was in Jr. high school I used to sell my free lunch to friends. They weren't on the free lunch program so they would have to pay $4 for a meal. I charged them the same amount, but I waited in line for them too (since I had to get my name checked off the list). I would then pocket $3 and spend $1 on some cheap crap to hold me over for the day. I find that if I am with someone, I am much more likely to spend money on food. Heck, I will even buy their lunch! But when it is just me I will likely try and just find something at home I can eat. This happened today actually as I was craving something and thought, "no, I can save the $6 if I just go home and eat." I think it a good and a bad thing because I enjoy food immensely and I think I deserved that special treat today, but since I knew I could produce a meal at home, I went for the "free" option. I do this to myself a lot, but I think I need to loosen up a bit and give myself what I want sometimes.

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    1. I am also more likely to spend money on food when I am with other people, but that's for almost the exact opposite reason. I'm not a big food person, I never really have been. It's just one of those things I do to keep me alive (though I do have a sweet tooth, which I'm trying to cut back on).

      I find that when I'm out with people I am more willing to spend money on going out for food since that typically seems to be the normal thing for people to do. I don't really chalk this one up to my food budget though, I would probably put this into my entertainment budget since I don't go out all the time with people and I do it for their company, not because I really care about the food I'm getting.

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  8. Using Mint.com I once saw that I was spending over 1k on eating out every month and that is minus dessert and usually not really drinking. So um, yeah....

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    1. Ahhhh! I hope you either made changes or loved every moment of those meals!

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  9. I love the stranger test! I can usually just do the comparison in my head, the stranger test might just become my second line of defense for unnecessary purchases!

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    1. I can do the comparison, but it's really about visualizations for me. A stranger holding cash is usually the easiest for me.

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  10. I don't think I've ever heard the stranger test articulately described.I've never heard of this before, but visualizing the cash equivalent is so powerful!

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  11. I love the stranger test! Thank you for sharing. Hope you keep to share more and more good post like this.

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  17. That is some great advice on saving in the face of low income. Right now I am able to save only $400 a month of which I hardly invest $250 because of the emergency fund and insurance payments. Hoping to use this strategy in 2019...

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  18. YES! Love that stranger test!!! For some reason I've only thought along those lines like once or twice in recent memory, but I agree getting into the habit of it is CRAZY good for your finances... Literally putting this on a sticky note right now so I don't forget it again - great tip!

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