The Best Method to Create Better Spending Habits
You work so hard every day to ensure you have money in your pockets. It affords you a particular lifestyle, and you can take care of your bills without any problems. It feels amazing to be able to take care of yourself without depending on other people. However, you always find that even before the week is over, you barely have any money in your pocket. Now you start to wonder whether all those purchases you made were really worth it. You look at some of the items and realize that maybe, just maybe, you really did not meet them. Yet you continue to grapple with the issue of incoming vs. outgoing money.
If you were to seek finance advice, you would probably learn that you are not smartly spending your money. If, like the millions of other people, you struggle to spend what you have, while putting aside something for a rainy day, you should continue to read on.
What Is Unwise Spending?
There are specific habits you may have that those who have managed to master resource use would consider unwise. You always find that you are in debt, and are not able to take care of your basic needs. Your credit score is suffering because you are not able to keep up with the monthly payments. The reality is that the problem lies with your inability to make wise decisions when it comes to how you spend your money. Some of the things you do that you should stop immediately include:
Not Keeping Track Of How You Spend Your Money
The best piece of free finance advice we can possibly give anyone is to keep a close watch on how you spend your money. It means that every time you go shopping, you have a budget which you must stick to. Watch your bill payments, so that you are always on top of things. If you must, you will find several apps on the online platform that can help you track you’re spending. Only then can you ensure that your expenditure remains lower than what is coming in.
Trying To Keep Up Appearances
You may have heard the familiar phrase Keeping Up with the Joneses. It refers to a situation where you will buy things simply because other people have them. Since your neighbor has a flat-screen 50-inch television, you must have one as well. The truth is, you do not know what kind of financial situation your neighbor is in, and there you are trying to compete with him. You inevitably find yourself in debt, and trying to get out of it becomes more and more difficult because of the pending credit. Be yourself and forget about trying to be like other people.
Not Putting Something Aside
If you on a certain amount and spend it all without saving anything, then you are just as bad as that person who exceeds their income level. You will find yourself in dire financial situations in the future because you are not saving. You must allocate a certain amount of your money to savings every month for that rainy day.
Resorting To Credit for Emergencies
It may surprise you that not many people will put aside anything in their emergency fund. When the situation arises, they resort to using credit to bail them out. If you have a good credit score, you will always find a lender who is willing to give you money. It can reach a situation where it becomes a habit, because you know you still have a fallback. What you do not realize is that you are continuously falling into debt, which you must eventually pay back.
Not Keeping Up With the Payment
One of the biggest causes of a poor credit score is the inability of many people to keep up with their financial obligations. The more you delay in making your payments, the more your credit score suffers. You will also find that you are paying higher interest rates on new loans. In some situations, you will not qualify for financing because of your credit history. You must schedule your payments to avoid such a scenario.
Not Checking Your Credit Report
Many people are guilty of not bothering to check their credit reports. You can easily access the information from the major Credit Bureaus or even annualcreditreport.com. You may be keeping up with your payments and feel that your credit history is good. Any error On the part of the bureaus could impact negatively on your credit report. You must keep up to date with the reports, and if you notice any mistakes, report them immediately for correction.
Not Taking Insurance Cover
Many people will take insurance only when they really cannot do without it. You may take it because the law requires it, for example, car insurance. In other cases, it may be part of a travel package, among others. In case of sickness, accidents, destruction due to natural disasters, among others, you can incur huge losses. You will find several covers in the market that are affordable and can give you protection when you need it.
Dipping Into Your Retirement Account
While your retirement account can give you money when you are in a Catch-22 situation, you must not make it an habit. Not only do you mess with your retirement money, but you also pay the penalty for early withdrawal. Think about your retirement account as something you should never touch because you will need it in the future.
It can be very exciting, and perhaps a good idea to invest your money in things you know can give you a good return in the future. However, it is a terrible idea to invest for the sake of investing. You must not buy into the marketing language that sensationalizes certain investment vehicles. Before you put your money into any investments, you must seek financial advice from an expert. You must also buy more than one product so that you do not sink all your money into one portfolio.
Being Too Kind
While there is absolutely nothing wrong with being kind to your fellow human beings, you must do it within limits. If you only have one income, and you take on too many financial burdens of other people, it could get you into trouble. Only take on responsibility if you can afford it. You must also be careful about co-signing because if the person you are helping does not meet their obligations, the lenders will come after you.
Smarter Spending Habits
We have looked at some of the things you do that could result in unwise spending. However, it is possible to get into the habit of spending smarter, so that you live within your means. All while taking care of your financial obligations. Here is the perfect way to get into good spending habits.
You Must Break Bad Spending Habits.
Financial experts say that one of the reasons why people will misspend their money is because of how they feel after they spend it. That could explain why some people call themselves shopaholics. There is a ‘high’ that they get every time they swipe their credit card to make a purchase. The high is inevitably followed by a crushing low due to the guilt that comes from spending such large amounts of money. Unfortunately, many people will continue to seek that high by spending more money.
Your case may not be as severe as the scenario we have just described above. But you may find that it is pretty close and that is why you must break such habits. You have to learn to say no, avoid situations that will result in spending money you do not have, and, overall, start to use your money wisely.
How to change it?
The first step is deciding what is siphoning money out of your account. Secondly, focus on what you can do without. You can, for example, decide to carry packed food from the house for your lunch instead of going to a restaurant while at work. You could choose to use public transportation as opposed to taking a cab every day. You could start by writing a shopping list and sticking to it. Family fun days do not have to involve going out to expensive places, how about a fantastic home meal followed by movie night and games. Instead of going to a costly salon, you could try some DIY beauty and hair tips at home
We know what our bad habits are, and you only need to be honest with yourself, so that you can take remedial steps. Talk to your spouse, friends, or family members to point out some of the areas they feel that you waste a lot of money on. Sometimes, it is better to get insights from other people.
Substitute Bad Habits with Good Ones
Substituting the bad habits with good ones can be a bit difficult. You may, for example, find it very hard to carry packed lunch in the initial stages. The DIY home beauty treatments may not feel as relaxing as going to a salon, and having someone else do everything for you as you sit back. It requires a change in your thinking.
You must look at it as a way to save money and to help you better manage what you have. We recommend that you do the following:
Come Up With Financial Goals
It is easier to embrace smarter spending if you have a goal in mind. Your primary financial goal should be to develop better spending habits so that you can save and live within your income. You could, for example, work towards saving a certain amount of money by the end of the year.
You could also focus on working towards saving enough to settle outstanding debts in lump sums. Whatever goal you have in mind should be your driving force towards developing better spending habits.
When you are setting your financial goals, you must have long-term and short-term goals. You must, however, be realistic; otherwise, setting very lofty goals may lead to frustration, and an inability to stick to your goals.
Credit Card Debt
A credit card will give you access to cash whenever you need it. You must, however, remember that it is a loan, and you will have to pay it back. You must also factor in the interest you will pay. You must do all you can to avoid getting into a lot of debt. You can do this by:-
- Avoid making significant purchases using your credit card; no matter how high your limit is.
- You must not use your credit cards for emergencies unless you really cannot avoid it. You will develop a habit, and you will not see the need to have an emergency fund because of quick access to money.
- Do not make the mistake of buying what you cannot afford. Think about it this way, if you were paying cash, would you buy that particular item. If not, do not think about putting it on your credit card.
- Balance transfers to avoid due dates are not a good idea. Ensure you make your credit card payments on time.
- Make your payments in full so that you do not carry forward any balance.
- Stop using your credit card to get cash advance. It can become a temptation, because every time you need to cash, you know you can get it using your credit card.
- Under no condition should you give anyone your credit card. You will not have any control over how they use it
- Before signing on any dotted lines, you must understand the terms and conditions of your credit card. Pay attention to how the lender calculates interest, and the penalties you can incur if you default
- Avoid having too many credit cards so that you have more self-control with your spending
Learn To Live On a Budget
If you are someone who does not prioritize their spending, you may initially find it very hard to live on a budget. However, this is the best way to plan your spending, thereby allowing you to get out of debt. The best way to do it is to come up with a list of wants and needs. Now, tear up the wants list and go with their needs one. You may, for example, need a bag. You, however, want a designer bag because it is more fashionable and you like brand names. The wise spending ‘angel’ on your shoulder will tell you to buy a functional, cost-effective one. The ‘want’ devil, on the other hand, will tell you to get the designer bag. You must be ready to ignore anything that will get you to spend money you do not need to.
Shop Around And Shop Like a Pro
Shopping around is another fantastic spending habit and a way to save. It will require that you take some time to do some research before you go shopping. You will find the same brand retailing at different prices, depending on the outlets. Compare pricing and find the best places to shop. For household items, it would make more sense to buy in bulk because it ends up being cheaper. You can combine shopping trips with a neighbor or family member, buy at the wholesale outlets, and then divide the items amongst yourselves. It will shock you how much money you can save by shopping this way.
Another fantastic way to save money and develop good spending habits is to take advantage of discounts. Become the best bargain hunter you could possibly be. You know the items you will most definitely use at some point, and if you find them on sale, buy them and keep them. Clothing stores will also have clearance sales as they stock up for the new seasons. If you shop at this point, you will save quite a bit of money. Best of all, you do not have to struggle the next time because you will already have the items in your wardrobe.
Think about multiple functionalities when shopping. Items such as a good pair of black trousers can serve as an office or casual wear. Buy basic pieces and see how to accessorize, so that you always look like you are wearing something new.
You may get the urge to buy an item because it is on sale. You end up buying things you do not need and spending money you do not have. One good spending habit is to learn to look away when you see sales, do not even get curious, just keep moving.
Pay Attention to Your Monthly Bills
Take a keen look at your monthly bills and see which areas you can cut back on. Do you, for example, need a membership at that expensive gym? Can you go for a cheaper cable?
Be Smart with How You Use Your Utilities
It would blow your mind if you were to calculate how much money you waste by how you use your utilities within the home or even office. You may not think much about it, but leaving on the lights when you do not need to can lead to a significant increase in your electricity bills. Some of the things you can do within the home or office include:-
- Having a ‘switch it off policy’ if it is not in use. That means, if you leave a room, you must switch off the lights. If your phone is not charging, unplug the charger and switch off the outlet.
- Put off any electronics; the standby mode will only reduce and not eliminate the use of electricity. Switch off and unplug the appliance to prevent ‘leaking electricity.’
- In hot weather open the windows instead of using a fan to cool down the house
- Use natural warmth from the sun to reduce the cost of heating during cooler days. All you need to do is open your blinds and shades.
- Avoid using warm water to wash your clothes because it is more expensive
- When out of town put off appliances that do not need to be on for instance the water heater, thermostat, coffee maker, among others
- Unplug appliances that are fully charged to conserve your battery and reduce energy wastage
You know yourself better than anyone can ever know you. You also understand that there are those places that you will go to, and you end up wasting because you are spending money that you did not need to. You may, for example, have a love for pastries, and every time you pass by your favorite pastry shop, you must go in and buy some of the delectable items. If you know you have that weakness, then find another route home. If you love shoes, do not give in to the temptation to pass by your favorite shoe store to just try on some of the new stock. You will end up leaving with something.
Consider Getting Support from Others
One of the best pieces of advice on you will ever get if you decide to take up exercise to lose weight, is to get an accountability partner. If you are overcoming substance abuse, you need someone to support you through the process of recovery. The same goes for anyone who hopes to overcome lousy spending habits while working towards healthier ones. You may turn to your spouse, family member, a best friend, among others. It will only work if this person understands where you are financially, and where you hope to be in the future. They must be willing to give you feedback, even if it means offending you. You must also be willing to listen to them, and do your part in realizing your financial goals.
Automate Your Payments
The best way to ensure that you keep up with the bill payments is to automate them. It means that you work out a schedule with the bank so that they send the money directly, to the lenders or utility companies. It saves you from having to keep remembering to make the payment. Secondly, you do not get access to the money, which would result in you channeling it elsewhere.
Make Lump Payments If You Can Afford Them
If you have particular outstanding debt and come across some extra money, think about making lump-sum payments. The money could be in the form of tax refunds, a gift from a loved one, and a bonus, among others. You get to reduce the amount you owe, thus providing significant relief to you.
Consider such unexpected windfall money cash that you can use to eliminate your debt. While you may feel that you need to reward yourself with such money by, for example, going on holiday, it will serve you better if you pay what you owe. You can now work at developing better spending habits so that you do not find yourself in a debt situation again.
Find Other Ways to Occupy Your Time
You may find that when you are bored, you look for the best online deal you could get. You find yourself browsing multiple stores, and placing orders you have no business making. If you are guilty of this past time as a source of pleasure, consider finding other ways to occupy your time. How about carrying a book, and reading it the next time you are bored, instead of engaging in bad spending habits.
Give Yourself an Occasional Treat
You have been good, and have been working hard towards realizing your financial goals, and you are starting to get your spending habits under control. You must occasionally reward yourself for all the hard work. You could, for example, go for dinner once a month instead of the weekly trips you used to make before. If you feel that changing your spending habits is a punishment, you are not likely to stick to it.
Keep Educating Yourself
One of the best ways to gain financial discipline is to keep educating yourself on how to develop the best spending habits. You will find very many resources on the online platform, that will teach you how to manage your finances better. It would also not hurt to get finance advice from those who have the relevant knowledge.
Getting yourself knowledge on personal finance will allow you to understand your spending habits, and how you can improve upon them. Go back to the beginning, so that you can remember why you need to have financial discipline. You can also ask those who managed their finances well within your circles to teach you how they do it.
Use those savings to build an Emergency Fund
Creating better spending habits should allow you to save some money. You can save this money on a new bank account and decide to save in case of emergency. Either if you need car repair, home renovation, medical bills, … This emergency fund built from better spending habits might prevent you to go back the wrong way in case something unexpected would happen!
Developing healthy spending habits is not as hard as you may think. It requires a shift in your mindset and a willingness to try something out of your comfort zone. It will mean that you occasionally deny yourself, but you will be working towards achieving financial freedom; freedom that many people can only dream about. Get some finance advice so that you know how to go about eliminating some of the debt you have. Most importantly, learn to spend only what you have by budgeting and prioritizing. You must ensure that you keep up with your bill payments to avoid getting further into debt.
About the Author – jamie a
Ethan founded OfferEDGE in Dec 2013 with the mission to unify the financial quadrants through a system that allows businesses to be seen when consumers use a Single Sign On across Lending, Credit, Money and Real Estate. Taub invents the offers and IP, while overseeing all aspects of the company. He also has orchestrated the company’s earned media across the brands Loanry®, Cashry®, Debtry®, Budgetry®, Billry®, Taxry® and more. This includes over 500 publications that have been featured across the web.