Save $50,000: Kick costly habits

fancy_car.ju.top.jpg By MONEY Magazine staff


The strategy: Change your relationship to the stuff you buy.

Years to $50,000: Eight

chart_kick_your_costliest_habits.03.gif

How to do it: Researchers at the University of Pittsburgh have found that impulse buying adds up to 30% of overall spending. Part of the problem: People subconsciously give themselves permission to buy more than they planned, padding their mental budget to account for the extra purchases they assume they'll make at the store. Stop making it easy on yourself to overspend with these behavioral tricks:

Look, don't touch.

Picking up that cashmere sweater or shiny new Android to examine it more closely increases your sense of ownership, according to researchers at UCLA and the University of Wisconsin at Madison. That makes it more difficult to resist buying.

1. Weigh your options.

Consciously ask yourself: Would I rather spend $100 on the cashmere sweater or save the money for a trip to Tuscany? Follow the lead of natural economizers who tend to focus on the opportunity cost of the cash they're tempted to part with, says Yale researcher Nathan Novemsky.

2. Make it tougher to spend.

Shop with a list, do a quick inventory of closets and cupboards before heading to the store, plan to pay in cash, and bring only that amount. Shoppers who pay in cash spend 10% to 35% less than those who pay with plastic, various studies have shown.

Mentally ballpark the total of your purchases as you're shopping, which helps you stick to a predetermined target, researchers at Cornell and Georgia Tech have found. Adopting smart shopping habits can help you cut discretionary spending on gifts, entertainment, clothes, personal care, and items for your home by a third, or $5,700 a year on average for households earning $100,000 and up.

3. Nudge yourself.

Creating separate savings accounts for specific goals and naming them -- vacation fund, holiday account -- makes it less likely you'll tap them for "unauthorized" purchases. To push yourself to save even more: Dartmouth researcher Jonathan Zinman has found that detailed reminders to save for a specific goal, via text, e-mail, or calendar alerts -- "Deposit tax refund in Roth IRA" -- can boost savings by 15%.

The tradeoffs: Go on too strict a spending diet and you may feel deprived, which can actually make you spend more. So allow yourself an occasional, well-planned splurge. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.12%4.00%
15 yr fixed3.14%3.00%
5/1 ARM3.25%3.01%
30 yr refi4.17%4.06%
15 yr refi3.21%3.09%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,785.95 7.80 0.04%
Nasdaq 4,760.81 12.41 0.26%
S&P 500 2,066.65 5.42 0.26%
Treasuries 2.18 -0.03 -1.18%
Data as of 11:58am ET
Company Price Change % Change
Bank of America Corp... 17.62 0.08 0.48%
Apple Inc 112.41 -0.24 -0.21%
General Electric Co 25.25 0.11 0.44%
Microsoft Corp 47.92 0.40 0.84%
Intel Corp 36.38 -0.64 -1.73%
Data as of 11:43am ET

Sections

Treasury sold its remaining shares Friday in Ally Financial, it's last remaining major stake from the $426 billion bailout of banks and the U.S. auto industry. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

By backing down from showing "The Interview,"Sony has set a dangerous precedent. Hackers now have a blueprint for hurting American companies. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

Payday lenders are spending millions of dollars in Washington in an attempt to get powerful politicians on their side as a government crackdown on the industry heats up. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.