If you are surprised by the numbers when your credit card bill arrives or can never figure out why you can’t keep cash in your wallet, you probably spend without really thinking about it. Maybe you’re often rushed, distracted or forgetful when you spend money. Such a habit takes time to break, but you can succeed with patience and conscientious effort. Here are a few tricks to jog your memory and help the habits stick.
- MAKE A BUDGET. If there is one single method that will help you reach your financial goals, it is making a budget. Seeing the number s in black and white brings consciousness to spending that never existed in the finances of many households. It forces a person to really think about available income, examine all expenses and prioritize spending. The importance of these three tasks cannot be overstated. When you examine your income, you may see ways that you could earn more. When you consider your expenses, you may see ways to reduce expenses without really losing anything. When you prioritize your spending, you can stop spending on what isn’t benefitting you and save more money for what counts.
- When you shop, compare a purchase to something more concrete and meaningful than just dollars and sense. It’s the “broke college kid” mentality: if you really only have X dollars and overspending is not an option, you have to compare and choose to spend wisely. For example, if Amy goes out for dinner and drinks with friends and spends $50, that’s equal to two weeks of groceries for her. Even that $30 pair of jeans means nearly four hours of work at her $8/per hour campus job; four hours she would like to spend studying for her final exams. A simple, concrete comparison clarifies your priorities and helps you easily make good spending decisions. To get into the habit, keep a pay stub with your cash and make a personalized credit card holder with a picture or a phrase to trigger this examination of a potential purchase.
- Establish a waiting period before spending discretionary income. Consider three different things you could do with the money if you didn’t buy the extra stuff. This will help you to practice the last and most important habit…
- Spend Consciously. When you need to save, save, but if you stick to your budget, pay your debts and maximize your investment opportunities, you should feel free to spend what is truly extra money on anything you really enjoy, even if others believe it is frivolous and unnecessary. The problem with American attitudes toward money is that too many people fall into two extremes. One group spends on impulse, barely thinks about their purchases and realizes only later what they bought and how much they spent. The opposite view will go to extremes to save money, deprive themselves, and feel guilty for spending money for anything, even if the purchase is well within their budget. Bottom line: don’t spend without thinking, but if you can afford it and you have truly thought about the purchase, you shouldn’t feel guilty about spending on something you would really enjoy. After all, if your spending habits are responsible and you are financially secure, why shouldn’t you enjoy the result of your hard work and dedication?
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