Fighting the Causes of Stupid Spending

My super unscientific conclusion, based on watching myself and how I act and comparing that to how other lawyers act, is that when lawyers are overworked and under slept, we make really stupid decisions about money.

We also make stupid decisions about money when (a) we’ve just been given a lot of it (e.g., during bonus season); or (b) we notice that we have a lot of money in our bank accounts. Your brain knows that you have money, and it reduces your discipline to not be dumb with it.

There are two enemies of savings: stress and feeling like you have cash to burn. Here’s how I fight them.

Don’t Look at Your Money

Feeling Like you Have Cash to Burn

Here’s what I’ve done to undermine the trick of the brain that tells me I can afford things I won’t value later: I steal from myself. I like to think of it as self-embezzlement. We just siphon off money so that we don’t realize it’s there.

It’s a three step process:

  1. We have two sets of bank accounts. One set we live out of and one set we save. My salary goes into the account we live out of and my wife’s salary goes into the account we save.
  2. We set up automatic deposits into investment accounts from the savings account. These require no effort on our part – the money just transfers automatically
  3. We look at those investment accounts on a regular basis only to make sure things are going smoothly, but not too often, and try hard to never look at those investment accounts at other times. (I fail at this. It’s a work in progress.)

The beauty of this is that for spending purposes, you just don’t see a big chunk of income. So saving that is relatively easy. And, because we budget with YNAB, we just don’t see this money in our normal budgeting process.

That said, there are some problems with this system. Because of direct deposit, bonuses, which should go into the account we save in, wind up going into the account we spend out of. I suppose I could ask to have those deposits made into the savings account, but that externalizes the costs of managing our money onto someone else, which feels creepy.

So, instead, when bonus season arrives I have to by hypervigilant about moving the money to savings, then to an investment account so that we never see it. But that requires a period of discipline. Still, a little discipline is easier to achieve than a lot of discipline.

Fighting Stress Spending

Discipline gets harder when you’re stressed or overworked. All of that is compounded when you’re traveling for work. Buying something stupid can feel like a nice reward for a period of hard work. Discipline is easier when you’re in your environment and in your routine.

The messages are all around – you work hard so you deserve a little luxury. Have a few $14 cocktails in the bar next to the hotel. Live a little. Saying no is hard.

There’s something about how your brain reacts to spending that feels really nice.

The trick, I think, is to plan ahead. Sometimes when I’m on work travel, I go to a grocery store and buy a jar of peanut butter and a thing of honey. I try to force myself to look forward to going back to my hotel room at the end of the day to reward myself with the peanut butter and honey. I realize this sounds a little silly. It is. But by shifting my focus to something that feels indulgent in a small way, I find I can change my expectations about what a reward is or should be.

Peanut butter and honey may not work for you.

Maybe you’d rather look forward to a hot bath, or a workout, or calling your kids, or a video game on your computer. It doesn’t really matter. It just has to be something free or cheap and something you’d enjoy. At the start of the day tell yourself about it and pump yourself up.

When the end of the day comes, you’ll find yourself wanting it.

One thought on “Fighting the Causes of Stupid Spending”

  1. Your money system of “self-embezzlement” is terrific. Limiting your income in this way is just a great way to get yourself to live on less. Thinking you have a ton of money is a problem that I noticed a lot of my colleagues had.

    When you’re in your mid 20’s making six figures, it’s easy to get caught up thinking you’re loaded, especially when you go from making nothing as a law student, to suddenly making this pretty ridiculous sum of money.

    By splitting up your income like you do – self embezzlement as you say – you basically can trick your brain into thinking you have less to spend. It’s exactly why automating savings is so important.

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