Keep spending in check and savings on track with this concept.
Have you ever heard the term “forced scarcity?” It might sound counterintuitive, but this concept is actually my favorite way to boost my savings and keep my spending in check.
Let me explain how this concept works. When I think back to when my wife and I first got married, we were absolutely broke, working relatively low-paying starter jobs. Somehow, we managed to always meet our needs, and never spent more than we had. Money was tight, and that kept us on our toes financially as we were both committed to staying away from consumer debt.
Over the first few years of our marriage, our incomes increased – and so did our spending. We automated our retirement savings and were hitting those goals, but I noticed we were spending everything else. Now, let me make this point: there is nothing wrong with this scenario, since we were hitting our savings goals. However, I saw a trend I did not like – if there was money in our checking accounts, we spent it.
The theory behind forced scarcity is to recreate or maintain that scarcity, even when money becomes more abundant. Hannah and I agreed to automatically shift a portion of our money out of our primary checking accounts, so that, to some degree, we always feel that money is scarce. It’s another version of out of sight, out of mind. Our needs are always met, and we live life with a high degree of enjoyment, but never let our spending run out of control.
Our team recommends automating savings for a number of reasons, but forced scarcity is the theory behind several of those reasons. If the money isn’t right in front of you, it’s harder to spend. This is a great concept to incorporate into your lifestyle now, and could lead to greater long-term wealth.
If you know a friend or loved one who needs help creating a budget and setting up automated savings, please, pass our name along. We’d love to help.