“You can have a Masters degree in making money, but you will still wind up broke if you have a PhD in spending it.” ― Orrin Woodward
Wise words from a wise man. What is the point of making tons of cash if by the end of the month, you’re left with a debt larger than your paycheck? We all know how tempting it is to spend all our hard-earned money on things that would actually bring us happiness.
Most of us, if not always, are prone to squander every last penny on unnecessary purchases that leaves us broke in the end. The truth is, no matter where we go or however we shop, the temptation to overspend on all sorts of random things, follows us everywhere we go. The question is, how do we refrain from the habit of overspending?
1) Identify yourself and the issue
Are you a chronic overspender? The first step in solving a problem is recognizing there is one.
If you shop till your bank account flops, yet you still wonder how your money just simply disappears, then you are headed on a path to DOOM. First and foremost you must be ready to analyze and criticize your own behavior. This will help you understand your spending habits and identify whether or not you are a compulsive shopper.
Ask yourself, what are the emotional and psychological triggers that causes you to spend?
If you notice the tendency to go on a shopping spree is at its highest when you’re stressed out or upset, then try diverting your attention towards a more productive activity, such as going to the gym. Not only will you be saving a great deal of money, you’ll look drop dead gorgeous in that dress you couldn’t fit in months ago or you’ll pack on a truckload of muscles and end up looking like Dwayne Johnson by the end of the year.
2) Avoid temptation
If you have to make a trip to the mall, make sure it’s a quick one. Don’t go walking into every store with a ‘SALE’ banner plastered at every corner. We all know how hard it is to turn back once we’re inside. Impulse buying is the main reason we overspend. We walk into the store with only one item in mind and end up leaving with 4 bags full of unnecessary junk. RESIST THOSE SALES.
If you feel the urge to buy non-essential items, put it back. Find what it was that you needed in the first place, grab it, run to the counter and head on home. Your bank account will thank you later.
If you’re unsure about spending on a particular item, especially if it is a major purchase, give yourself 30 days to think about it. Take the time to ask yourself, “Do I really need it?”, and most importantly, “Can I actually afford it?”. If the answer is yes, then go ahead and GET IT.
3) Shop with plan and purpose
“I want” does NOT save you money, and shopping without a plan often leads to overspending. When you’re dealing with expenses, a goal is crucial in making sure you don’t stray off track and end up regretting later on. Set goals the next time you’re out with a pocket full of cash.
The fundamental rule to stop spontaneous purchases is to have a PLAN, and most importantly – sticking to it. Always make a mental list or even better, a physical one, of the things you need to get so that you don’t go off-budget.
4) Set financial priorities
If you don’t have enough money to pay for the things you want and need, then grab yourself a pen and paper, sit yourself down and figure them out. The necessary items such as rent, mortgage, food, and clothing should always come first.
You should also be aware of unused subscriptions and payments. These are things such as monthly subscriptions to a magazine which you don’t even read and expensive gym memberships you pay for every year, which you don’t even go to. These things all mount up to a large sum of money if you calculate the amount over the years.
5) Set up another account for bills
Is there another method to help prevent overspending habits? Yes. By creating yourself separate accounts.
One for all the important payments such as the monthly rent and electricity bills and the other for secondary commodities. Set automatic transfers from your checking account to your savings accounts. This way your spendings won’t get jumbled up and you won’t have a hard time keeping track of it.
Other than that, get a debit card for each account so that not only is it easier to keep track of but it would also be impossible for you to go way over your budget. This will definitely help you learn to live within your spending limits.
6) Forget debit/credit cards
When we hand over our cards, we don’t actually see the amount of money we’re losing. While on the other hand, when we pay with cash, we have to physically count every single note and penny and that HURTS.
We’re often unaware of how much everything will add up to by the end of the month. Therefore, consider giving your debit or credit cards a break and stick to a cash-only financial diet. At the beginning of every week, take out a good amount for you to use throughout the week, which will be calculated based on your budget and then allocate the usage accordingly.
This way, you’ll notice when and where you’re overspending and at the same time, withhold you from relying on your credit card.
7) Shop like you’re broke
If you’re already heading towards personal bankruptcy yet you still spend like a king, then you need to make some drastic financial changes. Is self-gratification more important than being stuck in debt for the rest of your life?
Think of your credit card as a debt card and bear in mind that the money you spend in the bank is NOT YOURS. If you think of it this way, you won’t be so reckless with your credit card purchases. Always compare prices and opt for the cheapest and REMEMBER – cheap doesn’t always mean bad quality.
Therefore, always practice spending like a broke person, whether you are or not. This method may not seem as significant but it can make a huge impact on how much money you get to save each month. One cannot avoid spending altogether but spending less is definitely a good start.
8) Pack your lunch or eat at home
We all know we would be a lot richer if we hadn’t spent so much on eating out at restaurants. Restaurants leave customers with a full belly but an empty wallet. Instead of heading out to eat and shelling out money for breakfast, lunch and dinner every single day, pack your lunch the night before or quickly in the morning if you have the time and stay in and eat at home.
Limit yourself from eating out, to only once a week and gradually to once a month. There’s no problem in treating yourself with a nice meal at a fancy restaurant every once in a while but don’t let it become a habit. After all, you deserve a good meal. Planning your meals in advance means reducing your food costs overall, which will leave you with a happier bank account.
9) Keep receipts
It’s always good to keep track of all your receipts. This is another useful method to keep track of how much you spend on certain things over time. Instead of tossing all your receipts in the nearest trash can every time, fold them up neatly and put them in a file once you reach home. Dedicate this file for all your receipts, not only for safekeeping but in case you need them for official purposes.
10) A day without spending
Last but not least, CHALLENGE yourself.
For an entire month, try spending only on basic necessities and refrain from spending on anything else. You’ll be shocked when you realize how little you actually need to get by comfortably. If your budget allows it, then by all means, spend. But if it’s leaving you broke every month, then it’s time to start making better financial decisions. The formula to prevent this is by developing better money habits, setting a goal, and most importantly, by persistently sticking to it.
Although there are no powerful mantras to help you make more money, clear your debts and solve all your money problems, there are plenty of steps you could take to make it happen. It all comes down to you. If you really take the time to consider your spending characteristics and weigh out the pros and cons of every purchase you make, then you are officially one step closer on your path towards a prosperous life of FINANCIAL FREEDOM.