Seth Godin is a New York marketing guru but I find that a lot of his concepts and ideas can also be applied to finances. Recently, he wrote a blog that talked about serving sizes. Seth’s concept is that our natural instinct is to fill up the bowl. So our coffee, when we purchase it in our take away cup is filled to the brim; our debt level is just below our credit limit and we’re taught to eat everything on our plate or to supersize to have more value.
Seth’s theory, however, is if you want to do less of something you need to get a smaller bowl.
Now this might seem like the simplest possible life hack, but I think it’s genius because it’s so easy to put in place. It just works.
You can probably already see examples. It’s what happens every time we receive a pay rise. We’re already used to dealing with a smaller bowl yet when our bowl is made bigger by way of a pay rise it doesn’t take long before our spending is lifted to the new income. Suddenly we wake up one day and can’t believe we could ever afford to live on our previous income level. And we start searching for a bigger bowl.
I believe when it comes to our money (or the concepts can equally be applied to our business finances), there are 6 things we can do to cut our spending by reducing our bowl size.
Set up direct deposits.
If we understand our predisposition is to lift our spending to the income we’re receiving, we can artificially reduce the money coming in by setting up automatic transfers to a savings account. That way, the bowl we’ve created is much smaller and the only challenge is to set up the savings account in such a way that you don’t classify these monies as part of your spending bowl.
Siphon off a pay rise.
A pay rise means your bowl is automatically upsized, so before you get used to the extra cash hitting your bank account each cycle, make sure you increase your automatic transfer so that some of the pay rise is now being sent to your savings account. Again, you’re taking control of the size of the bowl.
Reduce the limit on your credit cards.
The danger of having a $10,000 limit on your credit card, for some of us, means we automatically count that $10,000 as part of our spending money — or part of our bowl. If that’s you, take control by reducing the limit on your card to one that you can pay off every month.
Hide your savings.
This is something I learned very early on about myself. If my savings could be accessed by my eftpos card, then I considered them to be part of my bowl. Sure you might argue I should work on my willpower but why keep temptation at close range when you can do something about it. If you’re like me (which I know many of you are), reduce the size of the bowl you can access on a daily basis by ensuring your savings aren’t accessible, whether that’s by card or internet banking.
Use different structures.
Structures such as companies, trusts and Super Funds ensure your personal bowl is lower but the overall bowl size is still intact. They provide tax minimisation, asset protection and a barrier between you and your assets. Of course, the best way of providing a smaller bowl is by using superannuation, which ensures your savings simply cannot be accessed and used before retirement and can be a great way of protecting your future self from your potentially sabotaging behaviour today.
Understand your natural instincts.
Sure you could work on your will power but if you’re a hopeless chocolate addict like me, you’ll understand that all the willpower in the world won’t stop you from scoffing the entire bar in one sitting if it’s in the house. Removing the temptation is far easier than than beating yourself up for having no self control when it comes to devouring the contents of the bowl.
What I love about Seth’s concept is the simplicity. By reducing the size of our bowl through a series of automatic payments, controlling our debt levels and hiding our savings we don’t have to permanently be on alert for overspending. It’s about working with our natural inclinations, not fighting against them.