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Today, we are experiencing one of the most challenging financial times in several decades. As a result, many have recognized the importance of being on defense when it comes to the management of our finances. Although spending less and saving more is the right approach, let’s face it--how many of us are truly ready to eliminate over spending all together? There are many people who are not ready to take this path to reach their financial goals. Perhaps a more realistic approach is to embrace a concept that would allow people to reduce how much we spend without eliminating spending all together. In other words, we could apply The Step-Down Principle.

The step-down principle, created by Professor, Alena Johnson (1999), of Utah State University demonstrates a fundamental way for people to consider saving money by gradually reducing spending instead of stop spending on a given item all together. Let’s pretend that your short-term financial goal is to reduce the amount of money you spend on eating out. Get a pen and pad and draw a staircase with four steps. Consider having a steak dinner. On the top step, write down the most expensive method to enjoy a steak dinner and the least expensive way on the bottom step. The most expensive approach (i.e. the top step) may be to dine at five-star restaurant and purchase a Filet Mignon steak dinner at a cost of approximately $55.00. The next step (i.e. the second step) might be dining at a middle-tiered restaurant, where a steak dinner could cost $38.00 to $40.00. At this level, Filet Mignon may no longer be an option, and the cost of a tasty steak dinner is around $25.50 at a fun family restaurant. The third step could be to cook your own steak dinner at home for around $17.50. At bottom step, which represents the least expensive options, you would most likely select fast food, soup and sandwich combos and the like. At this level, your dining cost could

average around $8.00 to $12.00. So you see, the higher you are on the spending ladder, the more you will spend. Start “stepping-down” and see greater savings!

The goal here is simple. You don’t have to eliminate your spending all together, but it is important to take a moment and consider multiple alternatives when you are itching to spend money. You may decide to step down two steps from the top level to eat at a family restaurant. Or, you may decide to take time out of your busy schedule and prepare a home-cooked meal.

The step-down principle can be applied to most shopping choices. Pass the boutiques and high-end department stores for a change and “step down” to discount stores, outlets, consignment and thrift shops…even flea markets! For those who are considering shopping for a new outfit, take a deep breath, think about your alternatives and “Step it Down!”

Step-Down Your Finances

Selette Jemison, CFS,