Too often finance pieces drone on and on about “cutting back” or starting a budget when it comes to expenses but that advice clearly doesn’t work. If it did, then everyone would be happily spending within their means and having tons of left over money to invest or kill their mortgage with.
They don’t though. Americans have on average $5,700 of credit card debt, Australians have $3,160 and those across the pond in the UK having a whopping £15,385! Obviously telling people to stop buying or doing things that make them happy or feel better doesn’t work. Dur.
Obvious, But Ignored
Now I say it’s obviously not working and by writing it out it again it sounds stupidly obvious. If you tell someone to do something they don’t like or don’t want to do… they’re probably not going to do it!
But we’re talking about something that’s good for you, that will benefit you in the future if you follow it. The lizard brain don’t care though. The lizard brain operates on emotions and wants and needs. It wants that shiny thing. It needs that sugary doughnut and no amount of intellectual rigour (from your prefrontal cortex brain) can stand up to it long term.
This battle between the two brains we literally have in our head goes on daily. One is based purely on emotions, wants and needs with no regard for the future. While the other is higher level intelligence and makes plans (like How To Pay Off Your Mortgage Faster), strategies and major decisions.
When most financial sites (or dating / food sites even) give out advice on how to fix a problem they almost never take this fact of life into consideration. You can override your lizard brain some of the time with willpower but that’s a finite resource and takes effort on your part.
What you really want is advice and solutions that make the lizard brain happy while also achieving the goals of the intellectual brain. In our case you want to be able to buy that shiny handbag / video game / whatever and also cut your expenses long term so you can put more towards your mortgage.
The Solution
So how do you win? How do you do the thing that’s good for you whilst still having fun, feeling happy and satisfying your lizard brain?
The trick we have always used is to simply make sure you’re cutting something you don’t really care about that much.
This once again sounds like common sense, just like our statements above, but go around to your friends and ask them how they’d save money if they had to. Often you’ll find they suggest cutting out the very things they love first (coffee, dinners out, movie’s, alcohol, clubbing, travel), all while gladly paying a $100 per month Foxtel bill that they never get any use out of or care for that much.
If you’re a coffee nut and buy two $4 cups of it a day, claiming you’ll cut it to $0 is likely never going to happen. You can try and cut it off over a longer period or you can leave it alone completely as it’s obviously something that you really enjoy in your life.
Instead, find some other expense and cut that brutally (to $0 even!) to make up for the over spending on coffee. You’ll likely find that cutting another expense will not only make up for it, but that you’ll notice it less too.
For example do you have Foxtel or two or three streaming services? Sure, cutting that would deflate your lifestyle as well and you might miss it… but I’m pretty sure you’d miss your coffee more! Do the math, how much is Foxtel costing you per month versus those 2 coffee’s a day?
The Foxtel might be setting you back $80-$120 a month while the coffees are ($4 x 2 x 20 = $160 a month), cut the Foxtel and you’ll miss it a little sure, but at the same time, you’ll still be happily sipping those coffee’s all week feeling just as happy but saving more money in the end.
While you may not have Foxtel or even a coffee addiction these are simply examples. We have a full multi-part series on cutting expenses above so open that up and start going through them beginning with the ones you really just don’t give a crap about.
Snowball
Brutally cutting expenses you don’t really care about does take a bit of finesse, but ends up leading to amazing results. In most cases you actually end up being happier rather than feeling depressed!
This is because once you cut out the item and realise that hey, your life is just as good as it was before but now you’re saving $XYZ/month more, you feel great! This then spurs you on to cut more expenses and push further and further.
A second motivator is that as you successfully cut the expenses, the loan date of your mortgage comes down and that further encourages you to push again. As we’ve seen before, even $200 a fortnight can cut you entire loan in half, so every little bit helps.
Eventually as you cut more and more expenses you get this snowball effect happening where you end up getting results that you didn’t even think possible. All while your life improves and you get happier. While it might sound like a simple, logical thing to do, the real magic is because it aligns both your lizard and intellectual brains goals up with one another.
Instead of fighting, they work together and you have nothing stopping you from achieving your goals. A very powerful thing indeed.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).
