When it comes to saving, every little bit counts:
From the $2 you find in an old pair of jeans, to the $100 you might automatically transfer into your savings account every time you get paid.
But what if you’re in need of a new savings strategy to really motivate you to put even more money away?
Well, chances are you’ve heard of savings strategies like the 52 week challenge or the 50/20/30 rule, but what about temptation bundling?
Conceived by Professor Katherine Milkman of the University of Pennsylvania, temptation bundling is an idea that involves pairing a ‘want’ (such as reading your favourite book) with a ‘should’ (such as getting your daily exercise).
It’s basically a disciplined trade-off whereby you can only do something you love when you also do something you really should be doing.
Pairing your vices with your desire to save
Temptation: Entertainment
Whether it’s binging on Netflix, going to the movies, or gaming with friends, most people have an entertainment vice.
But if you’re on a money-saving mission, temptation bundling could be the solution to easing your guilt about the time (and money) you spend on your favourite activities.
Let’s say you spend a pretty conservative two hours per day gaming or watching TV.
Committing to putting aside just $2 for every hour you watch or play would add up to an impressive $728 over the course of a year!
Not bad, hey?
(Check out Spaceship Boosts for more ways to pair your shopping with your financial future.)
Temptation: Shopping
Love browsing through clothes and books online during your lunch breaks?
Chances are the cost of that love for shopping might be adding up, but temptation bundling could allow you to indulge your shopping wants while satisfying your need to save money at the same time.
One way to bundle the two is by ‘price matching’.
For example, each time you buy clothes or a new book, you simply match that same amount and put it towards your savings.
The knowledge that you have to match your spend could end up cutting the amount of purchases you actually make. Let’s say you still shell out $120 a month, that would still work out at $1,440 a year saved!
Temptation: Eating out
Can’t survive without your morning takeaway coffee?
What about that Saturday brunch with friends?
Eating out is a pleasure many of us wouldn’t want to trade for the world, but by using your love of food as an opportunity to save, you won’t have to.
One way you can eat out without the rumblings of spending regret hitting your stomach is by ‘tipping’ yourself.
Tipping might not be a custom in Australia, but that doesn’t mean you can’t make a habit of assigning 15% of any bill you get when eating out towards your savings.
Even if it’s just $2 at a time, if you’re a regular foodie that could easily add up to $10-$15 a week or well over $500 a year.
I’m ready to bundle, but where do I stash my savings?
Choosing the right place to park the cash you save really depends on your goals and the timeframe you need to achieve them.
But whatever they are, there’s no use in squirreling your money away in a jar on your shelf – and maybe depositing it into a bank account won't help you achieve your financial goals as quickly as you’d like.
After all, you want a return on that money you’ve been working hard to save, right?
For many of us, short term goals such as buying a new pair of boots or going on a weekend getaway is where our focus tends to lie.
And given that these goals may not take long to achieve, it may make sense to stash the funds you’re saving through temptation bundling into a high interest savings account which couples easy withdrawal access with a decent ongoing interest rate.
Or maybe, you could think about investing your money in the share market (which is more risky than depositing it into a savings account, but may also have a greater potential upside - though it's not guaranteed).
At Spaceship, making your first investment can be as easy as downloading the Spaceship app and following the steps.
But what about long term goals?
From owning your first home to having a more comfortable retirement (or even retiring early), most of us have long term goals we’re trying to put money away for, but these can be easy to neglect in favour of instant gratification and short term purchases.
But given that you’re already disciplined enough to want to save in the first place, it makes sense to put some of the savings you may make through temptation bundling towards your long term goals as well.
Once again, the best place to stash your funds in order to achieve these goals really depends on your timeframe, the return you want and how much risk you're happy to take.
If you’re looking to patiently invest over a period of years it may be worth considering an investment option like Spaceship Voyager, whereas if your eyes are firmly fixed decades away on an early retirement, contributing more to your superannuation could be the best way to make it happen.
Remember – the best financial decision is the one that works for you – and if, after you’ve evaluated the risks, you’re still not sure what to do, consider seeking financial advice from a professional such as an accountant or a financial planner.
