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What if I told you finances are fun? That saving money, spending less and calculating tax returns is basically a hobby? That Calculating your budget is something you can look forward to?
Ok ok, it might seem like a bit of a stretch, but it IS possible to make your finances fun. And it’s through Money Experiments. Confused? Basically, a Money Experiment is an experiment you do with money to try and improve your finances.
What makes experiments fun? First of all, you are doing something you don’t do normally, which is exciting, but also you’re not doing it for too long, so you don’t feel that it’s a commitment. And the best part: you’ll be getting better with money! That means: financial independence, financial freedom, retiring early, being wealthy, etc.
In my personal opinion, experiments are the best path to financial independence. You do an experiment, you learn and then you apply. It’s amazing.
Experiments are the best path to financial independence.
So now you want to do a Money Experiment. Where do you get started? I’ve put up a snazzy process for you to follow and create your experiment:
1. Le Goal
Stop and close your eyes (after reading this of course). Look at your life, and have a brutally honest moment with yourself.
What finances do you want to improve on? What do you feel you’re failing at? What’s something you need to change? This could be as general as ‘I need more money’ or as specific as ‘I wish Ms Dumphrey would stop asking for money’.
Write all those ‘financial changes’ down.
So you’ve got your financial issue you want to improve on. Now what? Research it. Use these three questions:
- What methods will I use to experiment on this financial issue?
- What do I hope to achieve with this experiment?
- How much time will this experiment take and how often am I willing to work on it?
The ‘how’ part is the research part. Imagine your issue is ‘I need more money’. You want to find ways to earn more money. You research and you discover drop shipping and Shopify. Boom, your experiment: opening up an online store to earn money. Let’s say you’re willing to try it out for 2 months and work about 6 hours a week on it.
Le goal, le plan and now, it’s time for Action. Put your experiment into action. Write out when you plan on doing your experiment and follow through. Another trick is to tell everyone around you that you’re doing the experiment. This will force you to keep going so you can answer the nagging ‘how’s your experiment doing?’ questions.
The analysis has to be done at the end of the experiment, as well as during. Reflect on your results: did you achieve your goal? How did you feel about it? Is it a habit you think you could implement? Analyse what you think went wrong and what could be improved on.
You’ve done a Money Experiment! Yay! After celebrations, look back on it. What have you learnt from this experiment? Should you recommend it to others? How did you feel about it? And most important of all… did your finances improve?
You might be a little bamboozled by all this info right now, and that’s ok. Maybe your head is swirling with all the ways your finances could improve, and you don’t know where to start. That’s ok. Experiments are all about planning and self-improvement, so you can never go wrong.
You may have noticed the Experiments tab on the menu bar above. Yes, I do Money Experiments. To explain a bit better how a Money Experiment can really improve your life, I’ve written out a simple step by step example.
The exact same process as the one used above:
I want to reduce my expenses. I feel I’m spending too much, but I don’t know where to get started.
I research ways I could reduce my expenses. One thing that comes up: Each time I spend money, ask myself ‘What do I gain by buying this?’ and then immediately record the expense in an app (CoinKeeper). By doing this I hope to become more conscious about my spending and also be able to track my expenses more easily.
For one month, I track all my expenses as best I can, and my wallpaper on my phone is a lame background that says ‘What do I gain?’ I force myself to be mindful.
What I noticed:
- I throw away quite a bit of money on £1 things that I don’t need
- I am much more conscious about my money BUT I feel that I worry way too much about it now. I’m constantly worrying whether I will have enough for this and that. High stress levels.
- Sometimes money disappears and I have no idea where it goes. Made a separate section for ‘where did you go?’ money in the end (I usually end up discovering where it went a few days later)
- I made a conscious effort to reduce monthly expenses: I downgraded my gym, asked for a refund on several things and I always go shopping at Lidl (cheapest supermarket but I love it)
Taking note of expenses definitely made me more aware of what I’m spending and where. However, it’s true that I’ve become much more stressed about money, because I keep telling myself that I could be spending less and saving more, that maybe I don’t need so much money in the ‘entertainment’ section. Then when I’m out at the pub I end up overspending because I’m constantly like ‘budgets suck, I need a drink’.
As you can see, I’m not 100% happy with the results of the experiment. So, I decide to adapt it into a new experiment. My new goal: Reduce expenses without stressing about money. I want to find a way to reduce my expenses without causing me to want a drink each time I see numbers (no I’m not an alcoholic). After a bit of research, my new strategy is to record my expenses in the app and write about it in a journal every evening. Could it work? Maybe. But I won’t know unless I try.
The experiments become a never ending cycle of self-improvement and positivity. Truly beautiful.
How others do it
You might not be surprised to know that experiments are actually extremely common in the Personal Finance world. After looking around the community, I asked a few people what different financial experiments they had done and what had their experiences been. This range from life-changing one year experiments to small habits which improve your day to day life:
Mr Jumpstart at Jumpstart from Scratch
Progress Snapshot: Mr Jumpstart decided to do something different: use his children as financial guinea pigs (love that term). His Personal Finance website is all about the different financial experiments he has done on his children. Since both of them are starting their finances from scratch, Mr Jumpstart wants to make sure they get off on the right foot.
Not only does he teach them what he’s doing, but he’s giving them a well-built structure to manage their finances. This means his kids will graduate with low debt, financial accounts, financial tools, high credit scores and a stack of airline/hotel points and miles.
Chris and Jamie at Keep Thrifty
Chris and Jamie have made several experiments over at KeepThrifty.
Living in half of their house: After remodeling their house, Chris and Jamie realized they didn’t need the extra space, and since then have been downsizing to only using 826 sq feet of their 1,892 sq feet house.
One year mini retirement: Chris and Jamie decided to quit their jobs and do a one year mini retirement. This means they get to spend more time with family and friends, traveling and exploring the outdoors. Brave and inspirational story.
Tina and Max at 99to1percent
Living off 15%: Over at 99to1 percent, Tina and Max started an experiment living off 15% of their income. They manage to save for retirement, pay down mortgage and provide good education for their kid. The experiment really breaks down in detail where each expense goes and how anyone can try it out.
Jenny at Good Life Better
Getting Unstuck: Jenny is an example of a blogger who decided to do a small experiment on her finances: a spending fast between memorial day and labour day 2016. The experiment helped her understand why she didn’t feel her debt was getting any lower and what she needed to do to improve.
Brendan at Take Charge of Your Money
11 Day Savings Binge: Brendan went on a complete 11 day savings binge: saving everything he could. This meant not meeting up with friends for coffee, no eating out, no weekend activities and no unbudgeted expenses (wow). He then record each day and how he managed to live on this savings binge (turns out it’s not easy). At the end of the experiment he managed to save around R1,500 ($105)!! Simple experiment but he learnt a lot!
Could Experiments be the new method of Financial Education?
Money Experiments are fun to do and can only bring progress. Start planning one now, no matter how small or insignificant you feel it is. Bit by bit, you’ll like the idea and start doing larger scale experiments which could end up changing your life.
To help you get started, I’ve created a PDF of the exact steps above with some questions. All you have to do is think and write!
Also, I’d love to hear what money experiments you’re thinking of doing in the comments below!