5 Simple Money Habits That Helped Me Save 3/4 of My Income

Nothing comes overnight. Especially money.

Without building long-lasting habits I would never have been able to save almost 75% of my income on my journey to financial freedom and have a blast doing it.

The little money decisions we make every day add up over time. Which is why you need to form good money habits that stick. Habits that work for you and cause you to reflexively make the right choices.

Here are 5 simple money habits to help you make choices that mean not only saving money but having fun doing it too.

1. Lifestyle deflation

Lifestyle inflation is a hot topic in personal finance.

It makes good financial sense that as your income grows over time, you keep your costs steady. You avoid a keeping-up-with-the-Joneses situation of trading your car in for a new model, upgrading your tech, expanding your house. You avoid the trap of lifestyle inflation.

But what about going one step further?

Continually pushing for an ever lower cost of living in what I call lifestyle deflation.

• Not just keeping your existing car for a few more years, but actually trading it in for a cheaper model.
• Not just sticking with your current home but downsizing or moving to a cheaper neighborhood.
• Not just resisting the temptation to buy a shiny new watch, but selling the watch you currently own. (I mean, who needs a watch anyway?)

Once I started down this path it became an addictive, satisfying habit. A game of lifestyle optimization that led me to a simpler, more contented life — and an insanely high savings rate.

2. Avoiding deprivation by spending intentionally

I always hated budgeting. Which is why I never did it, even when I was saving almost 75% of my income.

My approach was to adopt intentional spending.

Simply look carefully at all the money you are spending and think hard about whether you really get value from it. If you don’t, cut it down (or out, altogether if you can). But if you do, then spend away guilt-free my friend.

So for me,

$10 on a crappy takeout pizza? No, no, no. I’ll make pizza at home.

$1,000 on a trip to Naples to eat the best pizza in the world with friends? Yes, yes, yes. Book those flights now.

By cutting out spending on anything you don’t get value from, but continuing to spend money on the things that are really important to you, you’ll never feel like you are being deprived.

Which will mean settling into good spending habits and never feeling the urge to go on a big spending blowout.

3. Ditch the sweatshops

I used to buy new T-shirts on an almost weekly basis. The sort of crappy T-shirts from major stores that are so cheap you can’t quite believe anyone’s making any money on them. The poor folks who grow the cotton or work in the factories sure aren’t.

But predictably enough within a couple of washes, they were out of shape and the colors were faded. So, back to the store I would go.

Until I finally cracked and realized this was getting ridiculous.

I spent 10x what I was spending on one of the low-quality, morally shady T-shirts, on one Merino wool T-shirt. I wore that T-shirt every darn day, yet it lasted me almost 3 years and only required washing about once a fortnight.

You might find that buying one top-quality knife mitigates your need to buy dozens of kitchen gadgets. Or buying one well-made piece of furniture avoids frequently replacing the same item from Ikea each time it breaks.

Maybe our grandparents got it right; Paying for quality can save you a lot of money in the long run.

4. A pathological aversion to debt

Credit card? No thank you. Store card? Certainly not. Car loan? Nah.

The thing with debt is that it’s fine. Until it’s not.

It’s fine to put all your expenses on a credit card and earn all those points. Until you get laid off from work unexpectedly and suddenly can’t afford to pay off the balance.

Any debt I owe represents a financial commitment that traps me and benefits someone else. It means I have to prioritize paying them back over saving money. It means paying interest on debt, rather than gaining interest on my savings.

Hiding your credit card away and getting in the habit of paying with your checking account means more money for you and less for mean Mr Mastercard.

5. Save first, not last

You’ve probably heard the old saying “pay yourself first.” There’s a reason it’s so powerful and oft-repeated. It works.

Like most people, I used to wait until the end of the month to put aside what I had spare. Except, of course, most months there was nothing left to save.

Switching to the habit of putting money aside the moment I got paid changed everything. I still always seemed to have enough money to get through the month, even though I’d already put a load of cash in savings.

This simple habit is guaranteed to rocket your savings rate overnight.

Saving is simple

Saving is not rocket science. It’s not even 3rd-grade science. But it takes a little effort to get off the ground.

If you can reduce the fixed costs of your lifestyle whilst also increasing your earnings, your savings rate will soar.

By spending money intentionally rather than trying to deprive yourself, you can still get value out of the money you spend and avoid blowout splurges.

“Buy cheap, buy twice” goes the old saying. Except it’s often more like “buy cheap, buy dozens of times.” One quality item can replace many cheap purchases.

Of course, avoiding debt saves money in interest payments. But more than that it gives you the freedom to make financial choices that benefit you, not the bank you’re beholden to.

Finally, pay yourself first. Put money aside for savings the second your salary hits your account. You can always pull money out in an emergency but if you wait till the end of the month I guarantee you won’t have much leftover to save.

Habits become more ingrained over time. They not only become easier to stick to and more rewarding but also mean that one slip-up is less likely to derail you. The secret to improving your finances is to focus long-term and these 5 simple money habits will help get you there.

---

Thanks for reading. If you’ve found value in this article, hearts and tips are always appreciated. You might also like to consider subscribing to my free newsletter, Freedom and Meaning, for actionable simple living and financial freedom tips to help you live a more meaningful life.