(image credit: chipotlebreakfast.com)
Sometimes people wonder why a guy who makes a six figure salary will still bother to fill out a form for a free razor, or sign up for a credit card for the $100+ bonus. Well, for one thing it’s a habit leftover from making $15,000 per year. Back then, adding anywhere from $2,000-$5,000 a year to my annual income from various shenanigans was a huge benefit. It allowed me to enjoy niceties like not eating spaghetti three times a week and booking flights to visit my girlfriend (while still paying down student loans).
In this way, I started to correlate little savings with specific things. $5 meant a plate at the Indian food cart or a loaded burrito. So $100 wasn’t just an amorphous $100 to be deposited into a bank and forgotten, it was 20 meals. I’ll do XX for a month of naan & curry!
By extension, creating additional freelance income of $1,000 to me meant a flight + hotel to a new and strange spot in the world I hadn’t been before. For another person, they might think in terms of Lucky jeans, automotive gear, or ski lift tickets. I know this is a consumeristic form of thinking, but you don’t have to spend all the money you make, nor do you have to save all the money you make.
Do you have a form of motivational currency? Or is cash king?
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Although I do use similar comparisons (that six pack of beer cost me a lunch out! [with lunch out being more desirable than the beer], etc) My true goal is to save for a house, and get my spending habits tight enough that I can afford to buy the house I want now (vs a hold-me-over house), while interest rates are fairly low and the 8k first-time homebuyer credit is available (I’m 27, so this is a fairly tall order). Unfortunately, this does make my true goal only measurable as a “blob of money.”
Dunkin Donuts Medium Coffee (currently at $1.81 per cup) – i often think about it in terms of that: “wow, i save $50! that would be 26 cups of coffee or coffee for a month for me!). yes, crude, but true….
I have used a similar metric since my part-time job days as a teenager. The only difference is that I applied it to spending.
For example, when I worked for roughly $5/hour (@ 20 hours a week) before taxes I would view a $100 expense as 2 weeks of dragging myself to my part-time job. Trust me, when I thought about expenses that way I hardly made any stupid/impulse purchases.
My wife and I like to travel so we adjust our spending. I handle the yard work, $1200 saved a year. Make our own latte, save $1500 a year. Installing new irrigation, $800 saved. To be honest, I prefer to hire someone to do the irrigation, getting on your knees and digging in the hot sun is not fun but the money we save and going on a nice trip is all worth it. This is what motivates me to the handy work around the house. If I had to hire someone, then we wouldn’t be able to afford to travel.
My friend thinks of things in Jack in the Box tacos. 2 for $1, so when I told him the average American spends more than 20grand on their wedding, he said “that’s 40,000 tacos!!!!”
You make 6 figures?
Golf. I think in rounds of golf. Canceling the $60 directv bill is an extra two rounds a month with out affecting the budget. Skipping the $30 taxi ride to the airport by carpooling is a loop at the muni. Couple hours of OT and I can treat myself to one of the $120+ courses. May seem pricey but 2-3 hours of OT for 5 hours out on a course in beautiful weather is a good trade in my book…
I tend to think in video games, even though I am almost 30. I guess it is a holdover from my childhood where every spare penny went to the purchase of the new game on the cover of EGM.
I try to save in many ways such as bag lunch, making my own coffee and grocery shoppind only for sale items but I’m still missing the real niche when it comes to savings. I love the information you provide on your site- pls keep posting for people like me.
I know exactly what you mean! I make a salary in the low six figures and still giddily use coupons at McDonald’s, fill out sweepstakes, and buy clothes on eBay, then resell those clothes when I’m tired of them.
In the long run, it means that I actually spend very little because so much of my money is being “recycled.” On the other hand, if the economy were filled with people like me, it would probably never grow.
Yes! My last year in college I wanted to get my pilot license before shipping out to grad school next year. I got a job so I can pay for the lessons and it helped keep me focused by thinking about other things I spent money on in terms of flight cost. Did I really want that polo or 1/2 hour of flight time? Do I really need another pair of sneakers for running or the old ones will do if I can go fly for another hour? It worked out great – I got my license in under three months when most of the people that start flying never get their license, mostly due to $ issues.
As someone else mentioned, it really depends on your goal. If you are saving for the house, than it probably won’t help to think that you save 1/300,000 by not buying that Milky Way bar. However, the smaller the goal and/or increments of $ you need to reach it, the better it would work for you.
Pedicures. Approx. $20 (some places that includes the tip, some places a little more). I think if I save a thousand bucks, I can get pedicures every week for a year. I love them – but realistically I barely get there once every two months. Men should try them too (though I don’t know many that do), but it’s really great.
Plane tickets. For around half a days work of OT, I can fly pretty much anywhere in the country. The way I do it is based off my pay rate for OT (approx $72/hr) If I want a new bike or some other toy/trip, I figure how many hours of OT I need to work to pay for it, then do it. That way I treat myself for my hard work, with no hit to the baseline.
Yes Corey,both Jonathan and his wife each make over $100k yr. The thing that I like most about it is that he didn’t come from a wealthy family. He wasn’t handed anything in life,he worked his way up. He is also very young(30).
To me,earning 100k+ yr is a lot of money and a huge accomplishment.
Just 6% of Americans make more than $97,000 a year.
I kind of do this, too! For instance, for a $5 drink at Happy Hour, I’ll think “Okay, that’s $5 less I can save.” I really enjoy seeing my savings go up, so it really does help me….though not all the time, because sometimes you just need a drink!!! he he 😀
Before I became a full-time student without a part-time job, the “currency” in which I liked to think of savings was taught to me by a friend of mine back in middle school, who would take the reverse approach:
Whenever considering a non-essential purchase, e.g., clothes, eating out, or whatever, he would calculate the number of hours he’d have to work at his part-time retail job to earn back the money.
He’d say things like “A pretzel at the mall isn’t worth having to work an extra 1/2-hour to pay for it.”
Imagining the hours we’d have to work to pay off potential purchases really worked for both of us.
I like to think in terms of this currency as being “riskable.” I do enjoy using much of my extra money for playing, but I also find it a prime vehicle for speculative, high-reward trades.
Typically the gains are enormous and well worth the risk. Plus it is fun.
I believe people can become truly wealthy by aiming to hit big gains rather than avoid losses (but only with their “riskable” money).
Thoughts?
hah! that is awesome. I had a friend in college who used to measure time in cigarettes 🙂 whenever I’d ask him when he’d be hitting up a party he’d go “oh…probably in about 3 cigs”. it was pretty funny at first, then it just got straight up annoying. he started measuring distance with it as well so 1 mile to the 7-eleven would now be 2 cigs, etc.
anyways, I think that’s a great idea. if you KNOW what you can get with the amount in question, you’ll keep motivated to keep saving/earning it!
It’s funny that Mimi’s currency is a pedicure. I just passed up a pedicure today because it’d have been two and a half lunches out for me. I love meeting up with girlfriends and eating lunch out. I usually end up spending more than $10 a pop but that’s how I count it.
My currency is time spent working. New TV? That’s an entire work week. A new car? That’s 1/3 of my work year paying for just the car. Dinner out? That can be an entire work day.
This post makes a lot of sense except for this part: “It allowed me to enjoy niceties like not eating spaghetti three times a week.” How is that anything but heaven? 😉
I prefer to measure in “dollars”…. and like to let the small values add up. For example… I have sold about $10,200 worth of stuff on Ebay, and have earned about $6,000 on “cash back” credit cards. What “currency” does that convert to? “Time to retirement”… not sure of the exact conversion rate however.
The problem most people have is they don’t think in terms of cost. I think of things in terms of hours. If you make $20.00 an hour then you are trading an hour of your life. To me nothing is more valuable than the time we have since it is the most precious thing we have.
Anything that leverages our time gives us a greater chance to be wealthy (If we use that time wisely. ) Instead of time management we should teach time maximization.
“Motivational currency.” I really like the idea of that. It seems to resound with my own selective spending or non-spending habits.
Money is just a claim on other people’s time.
I do think of $8 as being a lunch, and $5 as being a drink… But really, I’m just making a claim on the people’s time who manufacture and serve them to me.
Personally, I like to keep my money, because that eventually equates to time I can do whatever I want with.
Nice article 😉 For most people (with salary of 6 figures) probably the time spent on bothering about filling a coupon is more expensive than dedicating that time to an extra hour of work. This is clearly a motivational factor, as you mentioned above, in terms of annual savings, you can figure that with that simple decision of filling a coupon you are automatically spliting what you saved into a virtual account of savings into your mind that will leave you to do a travel, change your TV, to eat X qty of nice food each month, and so on.
Every $20 is one less day with my roommate!
What you say makes perfect sense to me. Of courese, there is no reason to explain. All one has to do is to read the book “The Millionaire Next Door” to undersand you logic. In case you don’t know the book, the same habits are used by millionaires and that is how they BECAME millionairs!
You realize that B with the line through it is more or less the symbol for the Thai Baht right? 😀
I do the same thing as Troy.
It’s good to know you keep your old habits, Jonathan. The image that spending everything you have is the only way any civilized person lives is sold to us by marketing departments. For me, at least, freedom is much more valuable than being a well-kept slave of society.
these are great.
i love spaghetti.
i cannot earn overtime, so for me it isnt about extra hours i work, its about $x of the disposable income i have for the year being gone. you can only spend each dollar once.
I prefer to measure in “dollars”…. and like to let the small values add up. For example… I have sold about $10,200 worth of stuff on Ebay, and have earned about $6,000 on “cash back” credit cards. What “currency” does that convert to? “Time to retirement”… not sure of the exact conversion rate however.
For me, it’s Venice. I decided earlier this year that in addition to saving money for investments, I’m going to put aside enough money to travel while I’m still young enough to enjoy it.
I used to give myself $xx per week for frivolous spending. Now, I put half of it aside each week for Venice. I also cash in all my coins each week, and add that to the fund. As I do, I think “This is a postcard in Venice.” or “This is a slice of pizza or a gelato in Venice.”
I do the same with any random amounts of cash that come into my life — coupons, gift certificates, rebates, etc.
I also took on a small freelance job that nets me about $50 per week for my Venice fund.
It makes saving a LOT easier!! Now, before I spend the money I ask myself, “Do I really want that Happy Meal or will I enjoy spending the money more in Venice?”
Venice almost always wins out.