Here's the No. 1 secret to saving more money

By April Dykman

You might be surprised by the one sure way to save money, listed first in the book "Your Money or Your Life" by Joe Dominguez and Vicki Robin. It's surprising because it has nothing to do with sophisticated banking tools, sacrificing your fancy coffee drinks or selling everything you own on eBay. It's much more simple than that.

"Stop trying to impress other people."

Dominguez and Robin write about conspicuous consumption, which is the tendency for people who have their basic needs met to spend any surplus money to impress others and inflate their own ego. Here's their view on the futility and high cost of conspicuous consumption:

Other people are probably so busy trying to impress you that they will, at best, not notice your efforts. At worst, they will resent you for one-upping them...If you stop trying to impress other people, you will save thousands, perhaps millions, of dollars. (And think how impressed people will be with how much you've saved!)

Dominguez and Robin urge you to consider the value of your life energy. Is it worth working 20 hours to buy the newest smartphone just because your golf buddy has one? Think about that. That's 20 hours of your life spent on impressing someone else.

Assessing your spending habits

Very few people can honestly say they never spend money to impress others. It's human nature. We see that our friend has a big-screen TV or a new car or a bigger house, and we think it would be nice to have those things, too. (Look at the picture quality on that LED screen! Did you know that luxury car has seat warmers? I'd love to have a media room!)

We have an event to go to, and we want a new outfit, even though we have perfectly appropriate clothes in our closet. We pick up a new hobby, and suddenly we need the most impressive gear to go along with it so that we will appear to be more skilled. Some people can't go shopping with friends without purchasing something, even if it's not anything they really want.

Take a look at your bank statements from the past three to six months, and be honest about any expenditures that were made with "what others will think" in mind. Did you buy something you didn't need or something that was flashier (and more expensive) than needed? Look around your house (and in the garage) and ask the same questions. Almost everyone will be able to identify several purchases or more that were made to impress others.

Now consider how much those items cost you. What price did you pay to impress other people? What if you instead start to save that money in a high-interest savings account, and forget about the proverbial Joneses?

What to do when temptation strikes

The thing is, we'll always face temptations, but it doesn't mean we have to give in to them. The easiest way to handle the urge to buy to impress others is to take two steps.

  1. Stop.
  2. Ask yourself why you want this item.

In fact, give yourself the time to actually think about the answer to that question by imposing a 24-hour to 30-day spending moratorium. Instead of purchasing something right away, make a note of it, give it time and see if it's something you'd still want when no longer in the heat of the moment.

Tie your savings in with your goals

Also, take time to establish your long-term goals so that you have a clear vision of the big picture when considering a purchase. What do you value, and what are your major life goals? Spending to impress others often gets in the way of these goals. For example, is early retirement a viable option if you're spending above your means month after month? Can you afford to take your dream trip to Paris if you buy a brand new car that eats up 18 percent of your take-home pay? Probably not.

You'll also find that it gets easier to recognize your impulse to spend money to keep up appearances. The more you question why you're buying what you're buying and remind yourself of your long-term goals, the more your spending will start to reflect your needs and wants, as opposed to those of your peers.

Live a little

Finally, it's important to understand that it's not about denying yourself fun. Money is a tool that can be used for many things, and you deserve to have some fun with yours. As Dominguez and Robin point out, this exercise is about "the intelligent use of your life energy (money) and the conscious lowering or eliminating of expenses." You might be surprised by how many expenses or impulse buys you can eliminate just by realizing when you're spending to impress others -- who are mostly likely spending to impress you, as well.