Turn Savings Into a Non-Discretionary Expense

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There are many ways to save more money each month. One of the easiest ways to save money is to treat your savings like a non-discretionary expense. When you have savings automatically deduced as a fixed expense, the money is no longer available for discretionary purchases. The nature of people is that if we have money we will naturally spend it. It is part of being on the hedonic treadmill [The principle basically says that humans will continuously spend more and do more until we die or until we are forced to re-adapt.]
Humans are very good at adapting to their environment. This ability to adapt has made our species very successful. Our ability to adapt can also be hurtful. In the parable of the ants and the grasshoppers, humans model much closer to grasshoppers than ants. We make very poor saver because once we have more, we adapt to spend more. Here in America, we also demand our freedom of choice which says that I should be in control of my money, my time, and my life, but the two principles compound together to make us slaves of debt. We view money as under our control when it is in the discretionary pool and we want to spend every penny.
Society has changed considerably in the past 100 years making this mentality dangerous to the good of society. We are no longer taken care of by our family in our old age and old age lasts much longer. The government created a mandatory baseline savings so that people would at least have something when they retired. They knew that without a mandatory savings program, the vast majority of people would enter retirement penniless or close to it. So as much as you may hate social security and as unfair as it may be, most people should thank their lucky stars it exists.
For the more future minded individuals capable of delayed gratification, however, wealth can be obtained for the future without significant changes to income. The key to obtaining wealth is maximizing the difference between your income and expenses. Then, funneling that difference into investments before our human hands get the chance to spend it. We are still in control of our money, but the money is bypassing our discretionary pool.
In general, monthly expenses can be broken down into two types. Expenses can be either discretionary or non-discretionary. Non-discretionary expenses include expenses that we don’t really have much control over. These expenses must be paid or there are serious consequences. These kinds of expenses include the mortgage on our house, taxes, insurance, utilities, student loans, etc. The money that is left over after paying all of these mandatory expenses is our discretionary income. It is the discretionary income that we have full control over. This money is used to purchase groceries, pay for gas, eat out, fix issues on the house, pay for television, cell phone, dry cleaners, etc. While these example discretionary expenses may not necessarily be optional, they are discretionary because you have a choice (i.e. your lifestyle affects if you need these items, and if so, how much they cost).
As humans, when money hits the discretionary expense pool, we want to spend it. Consequently, once it hits the discretionary pool, it is that much harder to keep. Therefore, knowing our frailties as humans, it is best to ensure that your savings are re-directed before they hit the discretionary pool. This means turning your savings into a mandatory expense. This can be achieved in about 5 minutes online. Simply go to your bank account and arrange to have money transferred from checking to savings the same day that your wages are deposited. This simple step transforms saving into a mandatory monthly expense, virtually guaranteeing that you will save more money in the long run.
While we may look at our monthly expenses and not see how we could get by on anything less than we currently have, the truth is that humans are adaptive. While this adaptive nature means we are quick to adopt greater spending when income increases, it also means we are readily able to adapt to less spending when the discretionary money pool runs shallow. If there is no money to spend we are far less likely to spend it and our wealth can grow that much faster. So start saving today by turning your savings into an expense.

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