• Useless spending can crush your savings goals.
• The easier it is to spend money, the more likely you will spend it. 
• Making things difficult can actually be a good thing.
• Small changes can result in significant improvements over time.

These principles make up the nudge theory, which suggests that behavior can be shaped through small, subtle changes. Making spending harder can discourage spending and increase your financial awareness to achieve savings goals.

Adding friction to your spending activities can force you to make more deliberate purchases. To nudge your savings by reducing spending, consider the following actions:

• Only pay cash for several weeks or months. The inconvenience of obtaining cash and keeping track of it for payments can reduce spending on frivolous items. Seeing cash in your hand can also make you more aware of its value.
• To be more disciplined, write out a list of purchases on paper or using a notes app. While this can be annoying, it can result in immediately having more money for savings.
• Account for all spending to avoid wasting money on silly and useless things such as empty calories and products you may not use.
• Before making a credit card purchase, check your current account balance to help deter unneeded purchases and increased debt. 

These strategies are useful for those who are concerned about their spending and who live paycheck to paycheck. While companies make every effort to remove barriers for your spending, don’t make it simple for your money to leave you…put up obstacles.

This approach may not be for everyone. However, taking some action might save you $1,000 a year, which over ten years could be worth over $15,000 when the money is placed in an index fund or other stable investment.

For additional information on the nudge theory, click here.

Teaching Suggestions

• Have students talk to others to obtain suggested actions for controlling their spending.
• Have students create a podcast to communicate actions to control spending.

Discussion Questions 

1. What aspects of the nudge theory might be useful for your money management activities?
2. Describe actions a person might take to place barriers on their spending.