I saved $10k in a year resisting the shopping fever, and you can do it too.
Last year I saved $10k.
I am not rich. And I don’t have a 6-figure income. I am a junior engineer working as a software developer, and my paycheck is average. Yet, I found a way to save around $10k in one year by only cutting my expenses.
Not only that. I upgraded my study with a new and expensive desk, I bought a Macbook and satisfied my shopping crisis many times. I went on holiday to Naples, where I almost always had dinner out, and I’ve taken other short trips around Italy. Furthermore, each month, I invested $100 on different assets and funds.
Despite that, my emergency fund has surpassed $10k lately.
Do you want to know how?
It is nothing revolutionary. You only need to micromanage your resources and save most of your salary. And since the process is not that easy, we will start with an old-fashioned list. But first, let’s calculate your saving potential.
How to calculate your saving potential
When I decided to cut my expenses, it was clear I couldn’t start saving everything I was gaining. There were things I had to pay, like the furniture, bills, subscriptions, etc. So if you want to save up some money, you have to calculate your saving potential first.
To do that, take your monthly income, and subtract from it all your fixed expenses.
Estimate your bills, furniture, and maintenance costs, and remove them from your monthly income. Also, to adjust your money output, fix a budget for any other variable expense, like food, clothes, or dinners out. Then, remove that from your income too.
Once you subtract everything, you will obtain your saving potential. This is how much money you can save in a month. And if you multiply it by 12, you can calculate how much you can ideally save in a year.
Ideal Saving Potential = (Monthly Income — Fixed Expenses — Budgets) * 12
Resisting the shopping fever
Probably you never imagined you could save that much money in only one year, but you can.
However, none of us is perfect.
Throughout the year, marketing techniques will infect you with shopping fevers. And you will feel a strong desire to buy a product as if your happiness depends on it.
Those are the moments that will define how much money you will end up saving. So if you want to approach your ideal saving potential, you need a technique to resist shopping fevers.
4 proven tips to save most of your income
The following 4 tips will allow you to save most of your income and potentially reach $10k in one year. However, if you think you need a lower challenge, you can check out how I built a $5k emergency fund and download a free printable for you to do it too.
1 — Make a wish list
The first step to save most of your income is to have a wish list with all the things you want to buy.
Throughout the month, many products will catch your attention, and you will wish to buy them. So add each of them to the wishlist and try to resist them until the end of the month.
Also, to improve your resistance power, rank each item by importance, usefulness, and need.
- Importance stands for your desire to buy the product.
- Usefulness represents the improvement a product brings into your life.
- Need is an external factor that requires you to buy a product.
This process doesn’t only give you perspective on what is necessary and what it isn’t, but it also makes you prioritize those products that matter the most.
Also, with this exercise, you realize how half of the products on your wishlist are useless, and you will remove them after a couple of days. So make sure to check it once in a while to keep it updated.
2 — Consider the pros and cons of each buy
Every time you add an item to the wishlist, think about the pros and cons of buying it. Then, write on the list the best thing in favor and the best thing against your buy.
Considering the best and worst of an item makes you treat that product as an object instead of the need corporations sell you.
When you see a commercial about the new console that would make you have fun with your friends, you will feel the need to play with your friends. But that need won’t be fulfilled if you buy the console because you will only own an entertainment system, not happiness.
So consider why you are buying the product, and eventually remove it from the list if the reason is only a human need.
3 — Calculate the monthly percentage of each product
Another way of realizing how much income you give up buying something expensive is to calculate its monthly percentage.
This number can help you understand the weight of a product when your monthly income varies and you gain more or less than before.
If you get a promotion, for example, and gain $200 more per month, you may think you can afford more products. But if you calculate the monthly percentages on your wishlist, 50% remains half of your salary and speaks more to your conscious mind. Otherwise, a flat price is less relevant because it doesn’t give you any more information.
4 — Define a variable safe time
The more expensive a product, the more you should reflect on your actions before buying it. For this reason, the strongest ally of your potential gain is a variable safe time.
Once you decide what you want to buy, the pros and cons, and the monthly percentage, there is one last test you need to pass to understand if you truly need the product of your desires: waiting.
Each time you put an item on your wishlist, you should wait for a variable number of days before buying it, depending on how much it costs.
For example, for relevant expenses that surpass the $500 threshold, I wait for at least 3 months. While for lower sums, I wait 1 day per $10, with a maximum of 30 days.
This way, at the end of each month, I will only have the products that passed all four tests.
Considering how many commercials we see daily, it is complicated to resist the shopping fever. However, with a couple of tests, you can understand if a product is worth buying or if you want the need they are selling you.
So here are the 4 proven tips to save most of your income each month.
The first test is the wish list — each time you want to buy a product, put it on a wishlist to analyze it better. Then, with the second test, you consider the pros and cons of buying it, so you can observe the product from different perspectives.
The third makes you achieve a broader view of the product relating it to your monthly income. This way, you can understand how much you are giving up by buying it. And lastly, the fourth test defines a variable safe time to wait before the actual buy, so you have time to reflect on your needs.
Also, you can resist for months without buying useless things, but the shopping fever will come to you sooner or later. For this reason, buy at least one of the items from your wishlist each month. This way, you can avoid making that shopping fever overgrow.
These are the 4 proven tips I used to save most of my income each month.
If you want to receive the FREE resume with the rules to reach $10k of savings yourself, subscribe to my newsletter, The Challenge.
Article first published on The Making of a Millionaire.