A lot of us live our lives on autopilot. And although its not always what’s best for us, from an evolutionary standpoint it’s a good thing. Scientists believe that this behaviour is a by-product of evolution. We have evolved in a world of uncertainty. Where we had to manage multiple risks and ensure your survival. This meant energy was a precious resource to be used diligently. And so till date our bodies and our minds are averse to burning energy unless we think its important (cue why we hate exercise or having to work out complex problems). But what does this have to do with the mindset to reduce expenses?
Your brain is a power hog
That’s right our brain is actually quite a power hog. Although it weighs just 1/40th of our body weight it consumes close to 20% of the energy needed by the body. Serious thinking needs a serious amount of calories. Our brain has found kind of a shortcut or middle ground or an energy-conserving mode. We learn behaviours and internalise them. And once we internalise them we work on autopilot. Autopilot uses a lot less energy than having to analyse the situation.
The complexity of Money
Money for a lot of us is made out to be a complex subject. More often than not as we grow up and become adults we revert to programming that we had received as kids. Now I’m not saying that all the programming we’ve received as kids was bad. But managing money is not one of the skills that we are trained for. Either by education ( unless you choose to specifically study it) or by experience. Managing money as an adult is a totally different world from managing money as a kid. Especially for us from middle class India. As kids, we had no source of income. Till our early, to mid-twenties most of us have mooched of our parents, who provided us with whatever we wanted ( and in too many cases a lot more than we needed). So till the time we start working, we’ve really only learnt how to spend. Theres never really been any motivation to earn or save money, or for that matter to manage money. Most of us dont even know what an expense is let alone how to reduce expenses. The biggest decision we might have struggled with was to figure out how much birthday money to save to buy the new pair of shoes, or fancy t-shirt or top or that phone we’ve wanted.
Carrying forward bad habits
Flash forward to your first job and your first salary. All that’s been programmed into us is how to spend. So when the first pay check comes in and you’re wondering what to do, your brain instinctively reverts to the behaviour it knows. Spend. And boy do we. We spend the money from slaving at a job on the most ridiculous of trinkets. Things that we probably get bored with over the next few months. This is exactly when you need an intervention. A big one at that. We need to teach our brains the skills needed to manage money, reduce expenses and save more We need to get it back into learning mode and put int the effort to understand and change our response and behaviour towards money.
Lets run the numbers
So lets take a money scenario. In Goa a fresher out of college can possibly earn an income of INR 10,000 a month.
Your out of college, in your fist job its been a month and your salary gets credited into your account. What’s the first thing that happens. Well most of my friends tell me its Kaching. Head over to Amazon and start shopping. New mobile phone here I come.
The sudden spending power goes to your head, and your well on your way to consumerist nirvana. Buying stuff to impress people who are trying to do the same thing.
Suppose that cell phone costs 10K and you buy it. Do you think its a great buy?. To the person whos just got their first salary im sure it is. It’s the spending power you have that makes you heady and your amazed by the thing’s money can do.
What happens when you cant reduce expenses
Now lets take another scenario.
You’ve been at your job for about a year your salary gets hiked by 10% now your making 11,000 a month. But somehow you’ve been living pay check to pay check the whole of last year. You have so many expenses, fuel, eating out, movies, that the last ten days of the month you have to ration every rupee. By now you’re feeling tired of your job. Your exhausted every day. You’ve got a bad boss. And your salary is credited to your account. Do you think you’ll feel the same excitement towards a cell phone?. What would you do in a situation like that?
So how do we get our mind to think and weigh out the decisions we make. How can we get it to manage the urge to splurge and reduce expenses
Here is a trick I use.
Whenever I get the urge to splurge I ask myself 3 questions.
- If I start from today how many months do I need to save to buy this thing?
- How many months do I need to work to buy this trinket?
- If I buy this gadget is the happiness it brings me greater than the frustration I feel working at a crappy job?
The brain usually is pretty good at making these comparisons. But you need to be rational
Coming back to our first 2 work cases
For a fresher Let’s say he saves a 1000 bucks a month
The cell phone is 10 months savings or a month’s salary. Does the happiness derived from the cell phone override the value of the frustration he feels at work?
I’m sure it does, but would the same apply to the guy who’s worked for a few years at a job he’s not happy with?
And that’s todays lesson. Frame all your purchases in terms of how many hours of work they cost you and whether they are worth that many hours of work. Find the balance between happiness that the gadget brings you and the price you pay for it in terms of time and frustration. You can apply this to every spend you make. Stuff like eating out, fancy clothes, clubbing, you name it. Here are some tips to how you can look to reduce expenses at home.
So give it a thought, and maybe the poixe will lead the way
Till next time