Bad habits are hard to break. When it comes to spending, a bad habit can make all the difference to your personal finances.
Maybe you already know that you need to spend your money more wisely but you haven’t quite figured out where to start. If that sounds like you, here’s what you need to do:
Understand Your History
Influences early in life shape who we are in our adult life, including our spending habits.
So take a look at your parents and other influential people from your childhood and you will most likely see a strong resemblance in your own spending habits. Did you grow up around spenders or savers? People who splurged or invested?
Do you see any patterns that you have taken with you to adulthood? Take notice and take action to make a conscientious effort to curb any of the bad habits that you were exposed to.
Know What You Value
Make a list of what is truly important to you in life.
It will be different for everyone but, in the end, knowing what you truly value will help you in making sure that your spending habits are in line with your goals.
Once you have that list, you can evaluate your money decisions against it. I’m sure that you will be surprised to find how much of your spending does not contribute to the overall happiness of your life.
Track Your Spending
Track every penny that you spend for at least 3 months to see where your money is going.
How much did you spend on stuff that you really didn’t need to have?
Create a Budget
Knowing where all of your money is going is great, but you also need to plan where all of your money should be going.
Create a budget so that you will have a plan in place to make sure that you are using your money the way that you need it to be used.
Set Financial Goals
Setting financial goals can help you keep overspending in check. Do you want to take a beach vacation this summer? Are you trying to grow your house fund?
Impulse purchases may not seem so great once you consider that that money could go toward saving for time on the beach or a down payment on your house.
Ask Yourself, is it Worth it?
When you are deciding whether or not spend money on something, take a second to ask yourself “is this worth the time I will spend paying for it”?
Y our time is money. Let’s say you make $20/hour and you are about to buy a pair of jeans for $150. Are those jeans really worth 15 hours of your time?
Ask yourself this question before you buy anything to see if it is worth it. If not, figure out a free or cheaper alternative that will leave you with more money in your pocket.
Figure Out What Your Triggers Are
Have you noticed that there are certain things that put you in a spending mood?
Does a bad day at work make your feel like shopping? Do your emotions cause you to turn to retail therapy for comfort? Does the thrill of a sale compel you to buy something even if you don’t need it? Does the constant exposure to ads in the media feed your need to have lots of stuff and pricey brand names?
Humans are creatures of habit, so being aware of these triggers will help you to come up with a way to avoid the negative triggers that lead to frivolous spending.
Needs vs. Wants
Do you understand the difference between your needs and your wants?
To save more and spend less you will need to take a look at what it is you really need and eliminate spending on some of your wants.
Don’t Deprive Your Yourself Altogether
The idea is to spend less and save more, not to make yourself feel totally deprived by not being able to spend anything at all.
It’s important to be able to splurge here and there in order to satisfy your need to indulge once in a while.
Spend Less and Save More When You Shop
Stick to a List – Never go shopping without a list. Always plan what you need to buy before you go to the store.
Use Cash Only – Make a cash only rule. If you can’t buy with cash, don’t go shopping at all. Credit cards make it far too easy to give in and overspend, making very costly mistakes.
(This may not apply to everyone. Some people – myself included – actually spend more when they have cash instead of credit.)
Think Before You Buy – Look at each item in your shopping cart and put back anything that you really don’t need. If you need to convince yourself that something is worth buying, then it most likely is not.
Trust your instincts and put those items back.
Sleep on It – Giving yourself time to think about large purchases will allow you the to figure out whether or not really want to buy something.
Wait at least 24 hours before purchasing any big ticket items. You may be surprised that you forget all about them the next morning.
With these tips you should be well on your way to changing your spending habits to save more and spend less.
Just be aware that it will a little while to break bad habit. Give yourself some time and celebrate the small wins along the way.
If you make a mistake, get back to it and try again. It does get easier.
Do you have any bad spending habits?