August 11, 2020 en_US Scientifically, you’re hard-wired to spend, not save. Fortunately, we can overcome our genetic aversion to saving by using psychology-based tips and tricks. https://quickbooks.intuit.com/cas/dam/IMAGE/A6dOltTqK/Psychology-based-tricks-to-save-money.jpg https://quickbooks.intuit.com/r/cash-flow/tricks-to-save-money/ 9 psychology-based tricks for saving money in your business

9 psychology-based tricks for saving money in your business

By Willow Older August 11, 2020

As a small business owner or self-employed person, you know how hard it can be to save money for your business. Whether you’re covering rent, payroll, or unexpected costs, there’s always a reason not to squirrel away your hard-earned dollars.

We’re hard-wired to spend, but we can all learn to save

Maybe you’ll feel better about the battle to bank your bills if you know that, scientifically, you’re hard-wired to spend, not save. When our ancestors lived communally, saving anything was considered selfish and a threat to the group’s survival, financial psychologist Ted Klontz told QuickBooks.

The pleasure centers in our brains light up when we spend money, says Klontz. That’s bad news for small business owners who know that cash flow is critical for short- and long-term company health.

Fortunately, we can overcome our genetic aversion to pinching pennies by using psychology-based tips and tricks. Here are nine strategies to help you start saving money for your business today.

1. Develop financial self-awareness

You must get an accurate picture of your finances to manage them successfully, Utpal Dholakia, a marketing professor at Rice University, told QuickBooks. Start by taking stock of your cash flow statement, balance sheets, and income statement. Maybe you’d rather get a root canal than delve into your books. But remember that knowledge is power, especially when it comes to saving money.

2. Create a spending plan

Klontz says that when it comes to your savings, semantics matter.

“‘Budgeting’ works as well as dieting,” he quips. The term has negative associations like restriction, sacrifice, and pain.

On an emotional level, a “spending plan” lets us spend (prudently, of course). Essentially, a budget and a spending plan are two means to the same financial end. But only one leaves us feeling like we’re actively in control of our spending decisions. It’s easy to guess which plan activates the pleasure centers in our brains—and which we’re more likely to stick to.

3. Set aside your savings

Psychologically, earmarking funds for a project or goal helps you “take it off the table” for spending, says Dholakia. You can go low-tech and toss your spare coins and cash in a jar at the end of the day. Or you can use a financial management solution to create separate accounts or envelopes for your savings. Either way, visually setting aside your money is a powerful reminder to add to, not withdraw from, those allocated funds.

4. Connect to your financial goal emotionally

Klontz recommends connecting with your financial goals emotionally. Entrepreneur Jody Burr says this strategy has helped her build and grow her coaching practice.

“My son dreamed of going to a private high school in San Francisco, and I opened my own business so that I could cover his tuition,” Burr told QuickBooks. “When he finishes high school, I’ll shift my goal to pay his college tuition. When that’s paid off, I’ll redirect again—maybe to a travel fund!”

5. Cultivate a savings mindset

This is a fancy way to say you need to think about how you think about money. Developing a healthy mindset about your money requires forgoing financial impulsiveness in favor of consistency, patience, and sustained effort, Dholakia says. One place to practice such prudence? The supermarket.

If you’re tempted to buy cookies, Dholakia suggests you pause and ask yourself, “Do I really need these cookies?” Finish your shopping and then assess how much you still want them. Or tell yourself you won’t buy them today—maybe next time. Or skip the cookie aisle altogether and order your groceries online to avoid the temptation completely. Taking small but significant steps can help you cultivate a money-saving mindset wherever you are.

6. Assess your expenses annually

We tend to take stock of things at the beginning or end of each year—the perfect time to assess your expenses. Anne O’Neill, the founder of Ignyte Marketing Group, starts each new year seeking to minimize the cost of simply doing business.

“As a small business owner, I have the flexibility to use video conferencing platforms to meet with clients and rent on-demand workspaces when I need to,” O’Neill told QuickBooks. “I always check the fees before I re-up on my subscription services. When you work for yourself, every dollar counts.”

7. Embrace exposure therapy—and ignore your instincts

It’s human nature for us to steer clear of things that make us uncomfortable. However, exposure therapy, not avoidance, is a better approach to saving money.

When you start setting aside your dollars (even if it’s just a few pennies a day), belt-tightening gets easier. Eventually, it may become a habit. But beware: Dholakia points out that small business owners, in particular, may be inherently resistant to saving.

“Entrepreneurs tend to be optimists by nature,” he explains. “If you always think next year will be better, it’s easy to postpone saving.”

Instead, you should start banking your bucks today, even if it means going against your instincts.

8. Automate your invoices

You can’t save money if you don’t earn money. And the key to getting paid is invoicing consistently. You might not think sending automated, professional invoices has much to do with psychology. But for many of us, billing is the bane of our business lives. Whether we’re reluctant to ask for money or resistant to balance the books, it pays to set up a streamlined and simple invoicing system.

9. Ask for help

Today, we tend to avoid talking about money except in a competitive “What did you make last year?” kind of way, Klontz says. That creates a stigma around having frank financial discussions—particularly if we’re struggling to save. Dholakia agrees.

Rather than feel isolated or ashamed, he encourages entrepreneurs to ask for help from an experienced financial advisor, bookkeeper, or accountant. Reputable nonprofit organizations like the National Foundation for Credit Counseling are also valuable resources for free financial advice.

“The world has changed drastically since prehistoric times, but our brains haven’t rebooted,” Klontz says. “We still have to contend with the innate messaging that it’s more fun to spend than save.”

Such messaging may be true, but we all know it’s bad for business. Good thing we can bypass our brains with some foolproof financial workarounds.

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