How to Motivate Your Family to Decrease Spending, Saving a Mountain of Money

Bouncing back from a bad economy or financial setback is easier when you have momentum! Whether struggling with finances or loosening the money belt, households that decrease spending as a unit are more likely to wind up on TOP of the money pile. (Instead of buried beneath it!)

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• A calculator
• Optional: a spreadsheet, such as Excel, or other budgeting software

1. Consider your expenses. This step can be as in-depth or as "case-by-case" as you need it to be, in order to take action! Look at recurring expenses, as well as one-time purchases. Know how much you are spending NOW on things like groceries, utilities, and other expenses. Look at purchases you will need to make soon... (Will you spend $10,000 on a newer car? Plan to buy a computer for $800?) Make a note of the areas you want to target for savings, and the estimated future expenses at the current spending level.

2. Determine your IDEAL (yet realistic) amount for each area, as well as the maximum cost you can tolerate, rounding down in each case, to account for a "bribe", bonus, or "kick-back". Let's say your son wants a computer, priced at $1,000. You can financially tolerate spending about $550 on the computer, but spending $125 would be IDEAL. Your tolerated cap would be $500 and your ideal cap would be $100.

3. Determine who is responsible for the spending in which area, and/or who would benefit from the purchase. For instance, all household members impact electricity consumption, but the computer will be used primarily by your teenager. OR... Maybe you want to decrease your own expenses on something like work-day lunches...! There's no reason you can't bribe yourself, right?!

4. Set a bonus "bribe" percentage for the adjusted tolerated and ideal prices, with percentage for the tolerated price lower, and the ideal price at a higher percentage. For instance, the $500 tolerated price on the computer would earn 10%, and the ideal price of $100 would earn a 20% bonus. So, if your son finds a computer for $400, that is saving $600. Multiply the savings by the bonus/bribe percentage of 10%, and your son would earn $60. If he finds a computer for $100, he has saved $900. With the 20% bonus, he makes $180! (See resources for how to find a decent computer for under $50!)

5. If a $180 bribe sounds excessive, change your thinking by doing the math on your savings...! On something you were going to buy anyway, you have significantly reduced your expense without putting in time or effort to figure out how...! If your son finds a reasonable computer for $100, then you have spent $280 on a computer, when the original option was going to cost you $720 more! (Add to this that he has independently found a money-saving solution, and the critical life lesson alone is well worth the bonus he earned!)

6. Apply the same concept to other spending areas... If your household reduces the monthly electricity bill from $500 a month to $300, they might earn 10%, or $20. Lowering the bill to $200 might score 20%, or $60. You can split the money up, or add it to a fund to do something fun. So while you spent $240 less on electricity, you also put $60 towards something GREAT to look forward to.

7. Have a family meeting! Remember that enthusiasm is contageous, and humor goes over well with the whole family! If you are saving for something big (like a vacation), make it something you already know everyone wants. Start the meeting with the announcement that you have found a way to take that trip to Disneyland! Yea!! BUT... it would mean that everyone helps out to save up for it... Everyone on board?! Yea!!! Then tell how: by finding new ways to save money. Kids get excited when they get to contribute ideas, so looking for money-saving solutions, and getting compensated for it, is an attractive prospect for kids, who are naturally creative and GREAT problem solvers!

Tips & Warnings

• If you want the kids to have "piggy banks", opt for one which is clear, and has a locking device. (These can be found inexpensively at places like The Container Store.) Seeing the money grow is EXCITING! And NOT being able to open it on impulse is helpful!
• Focus MORE on the team effort, and LESS on the individual effort. Why? Because you will have a built-in money police force! When one kid leaves the water running, you won't have to be the one to remind him/her to shut it off!
• Keep things fun by offering a money saving idea contest! The best idea earns a promotional 50% bribe for one month, and a lower bonus for following months.
• Use last month's bills as a benchmark for next month's bills, as a shortcut through the financial analysis. There's no reason you can't adjust the caps in different areas.
• When expenses have been cut in an area about as much as possible, the opportunity to earn "bribes" is lessened. Compensate for this by finding new areas to save money. Out of ideas? Offer up a special offer that new ideas this month will earn 25% on savings below the tolerated cap. For each dollar, that's still 25 cents paid, and 75 cents saved!
• To keep motivation going on something like a vacation, keep an eye on the stamina of your family members. When they are running out of motivational steam, order a promotional DVD on Disneyland's attractions, or decide to have a pizza and Disney movie marathon one Friday night instead of eating out, and you will witness their second wind! (And don't forget to pay the bribe on the evening's savings!)
• Only bribe for purchases that WILL be made! Finding things to buy, just for a bonus, defeats the purpose of saving! It's like buying something you don't need, just because you have a coupon.
• Skimping on the bribe will QUICKLY de-motivate your team! If you offer 5% for saving $20 to a kid, she'll decide that the $1 bonus doesn't compensate for the effort.
• If you second-guess your ability to set money aside, then open a savings account with the first batch of cash you set aside. Many banks offer accounts for specific saving purposes, and have low opening deposit requirements.
• For individual purchases, reserve kickbacks for bigger-ticket items. A kid trying to save 10 cents at a time will lose interest in keeping track. Saving a LOT of money on an expensive item is a lot more memorable and motivating!
• DO NOT try to keep track of the savings by yourself on a financial overhaul! Delegate! Each household member can keep track of their own savings on specific items, while the fridge can display a page with your household goals. Let family members track the saving in areas like water, gas, electric, and groceries.
• Don't lose sight of the fact that you can cut certain expenses only so much! If you challenge your family of four to cut the grocery bill from $800 to $400, it may be possible. But then demanding that it be cut from $400 to $200, and someone's going to be hungry! This team method is a powerful tool... But don't abuse your power by turning into a tyrant!
• Calling the bonuses a "bribe" shouldn't be considered a bad thing...! It's a silly way to get a household to do something good. We bribe kids to do their chores by paying an allowance, so why not bribe them to chip in an help hold onto dollars?!

Resources

• AMAZON.COM: Lorin's Bibliography of educational & other books
• Economical downloads- worksheets for chores, and other tools
• How to Get a Decent Desktop Computer for Under $50
• BLOG: A Panoptic Life
• Lorin who??