Tips to make the most of your money in 2023

The most impactful money-saving tactics to boost your savings rate without sacrificing any happiness.

The way human psychology works, having to make little sacrifices every day is unsustainable especially when it comes to money. The more you deprive yourself of little things, the unhappier you will become.

Out of all the tips I’ve ever used to save money over the years, these are the most impactful money-saving tactics to boost your savings rate without sacrificing any happiness.

1. Consistency

Consistency is key to anything in life from going to the gym to brushing your teeth.

Think about this: We start with our new year’s resolution by going to the gym, we run on the treadmill one day coming back home, looking in the mirror and seeing no change, and do the same the next day and seeing no change. We repeat this for a week and see no result, so we quit. Rather run 30 minutes a day, five days a week consistently over time you will eventually notice a difference i.e., consistency matters.

If we believe fundamentally there is something there, we then need to commit to the regime that consistency matters over time, not in one gym session.

This brings me to investments: consistency matters in the same way as the above – in this case staying invested, putting away capital monthly or even quarterly WILL yield phenomenal results over time. Enjoy the magic of compounding whilst you take on experiences or do things you love; I do the same and I’m grateful for it.

The noise does not matter as over time the noise of today will be long forgotten but the regret of “I should have” will remain.

2. Limit the luxuries

To me, buying coffee is not a luxury if it makes you happy, rather than worrying about the coffee you enjoy, focus on managing your long-term goals first by automatically putting money into savings and investments each month. Then, after you pay your expenses, you can use any leftover money guilt-free.

Big fancy houses and fancy cars are mainly financed by debt, and if other expensive luxuries that you never use are added, we constantly pamper ourselves with fancy ‘’stuff’’, but we’re collectively more depressed. This is called hedonic adaptation: When you get a bigger house, a nicer car, a promotion at work, and a bunch of new shoes, it feels good at first, but then you quickly adapt and return to your baseline level of happiness. Please do not misquote me for saying don’t buy a big house, just don’t forget that an unnecessarily large home comes with unnecessary large expenses.

Buy experiences, which is not a new concept: * Forbes: The Secret to Happiness? Spend Money on Experiences.

3. Use money to buy time

A study published in the Proceedings of the National Academy of Sciences found that spending money to save time makes you happier than spending money on material goods.

Commutes are one of the biggest contributors to life satisfaction:

Time Magazine: Your Life is Terrible Because You’re a Commuter.

Psychology Today: Commuting- the Stress that Doesn’t Pay.

If your commute is horrible, it’s probably worth paying up for a home that’s closer to your work or finding a new job.

Is your mattress old and leads to you waking up with back pains? Get a new one.

J.D. Power has found that 81% of people who replace old mattresses report high satisfaction with that choice. You’ll spend nearly 30 000 hours per decade on a mattress. It’s not an item to save money on. If you hate cleaning your home, paying for a cleaning service will probably make you happier than a new car. If you have a high income, spending money to save time might even result in more income overall.

When you do decide to spend money to increase your happiness, it’s pretty clear that saving time and eliminating the worst aspects of your day gives you the best bang for your buck.

4. Pay yourself first

Whether it’s your offshore, local or tax-incentivised investments, make sure you pay yourself first. I’m not going into the specifics of what types of investments but rather the concept of making sure they are maxed as much as possible especially if your expenses are low and have time on your side.

If you are saving too much, lucky you. If you can’t buy all the stuff you want, then perhaps consider a side hustle.

‘’Do not save what is left after spending but spend what is left after saving.’’ – Warren Buffett

5. Budget

Not everyone likes to budget, myself included.

For me, to save money, minimalism works better than being a constant budgeter and tracking every expense.

But at the very least, perform an audit of your expenses once in a while and see where your money truly goes. Apps such as 22seven or Moneysmart are free, but if you prefer the old-school excel spreadsheet that’s also ok.

Source: moneyweb