4 Easy Ways to Control Spending and Save More

The recent surge in inflation is scary, but don’t let those fears push you into risky investment choices or discourage you from saving.

“People often make the mental mistake of representativeness, which is thinking that recent past will extend into the future,” Statman says.

“When you’re seeking to build savings, it’s often easier to break down your goals into smaller steps,” says Hal Hershfield, professor of marketing and behavioral decision-making at the UCLA Anderson School of Management in Los Angeles.

In a recent study, Hershfield and fellow researchers Shlomo Benartzi and Stephen Shu looked at the impact of suggesting to new users of a financial app that they save small daily amounts of $5 vs. a monthly amount of $150. Presenting the saving option as a smaller sum led the number of consumers enrolling in the program to increase fourfold, the study found.

“There’s a disconnect between our present selves and our future selves, which makes it hard to sacrifice in the present for our future needs,” Hershfield says. “But framing the savings in small amounts makes it easier to do.”

What to do: Whether you use a financial app or a 401(k) plan to save, automate your savings, even if you start with a few dollars a day. Chances are, you won’t miss the money. And you can gradually increase the amount—many 401(k) plans will do that for you automatically, so the money really gets stashed away.

With the rise of smartphones, apps, and other digital innovations, it’s simpler and more convenient to manage your finances and everything else, which is why people check them constantly. But there’s a downside to these devices: Having a smartphone is distracting. Even having one nearby can impair your mental abilities.

That’s the finding of a 2017 study published in the Journal of the Association of Consumer Research, which measured the impact of smartphones on cognitive tasks. The researchers conducted two tests, assessing memory capacity and problem-solving ability. The subjects’ smartphones were placed at different distances—on their desks, in their pockets or bags, or in another room. The findings showed that, in general, the closer the smartphone was to the subject, the worse the performance on the tasks.

“The nearby smartphone demands attention, even when it’s not in sight—and resisting that demand puts a drain on people’s cognitive capacity,” says the study’s lead author, Adrian Ward, a psychologist and assistant professor of marketing at the University of Texas at Austin. “That can leave people more susceptible to making impulsive choices, rather than analytical ones.”

What to do: When shopping, managing your finances, or doing anything involving concentration, try to put your device away. “When I’m doing hard work or preparing to teach, I put my phone in a corner, out of sight,” Ward says. 

The biggest hurdle to saving is that it requires sacrifice—you must give up spending now to achieve rewards in the future. But once you start putting money away, there are immediate rewards—you have the benefit of having a cash cushion that can help in financial emergencies.

“People often don’t realize that there’s an emotional benefit today to having money in the bank,” Statman says. “You don’t have the embarrassment of having to ask your brother for money, or going to a payday lender because your car breaks down.”

If you are saving in a tax-sheltered retirement account, such as a traditional IRA or pretax 401(k) plan, you can also take satisfaction in knowing that you are getting a tax break from the government. A 401(k) may also have an employer-matching contribution, which will help you reach your goals faster. 

What to do: Turn your starter savings plan into a habit. “Once you start saving, it builds on itself,” Statman says. As you see your balance grow over time, it will become easier to stay with the program.