We are hardwired to carry out monetary transactions every day of our lives. It can be quite difficult to overcome bad spending habits, particularly if we don’t know what they are! We often get into financial trouble by buying more than we need. Not everyone spends money the same way. Even when making the same purchase, the emotional and logical reasons may be completely different.
An example is someone overspending on a newer model of a vehicle over the previous less expensive model. Some rationalise the decision to overspend with safety concerns. Others may have purchased it as an attempt to “buy” their way into a certain social circle. Peer pressure can persuade us into making some very irresponsible financial decisions, in most situations leading to debt. We might end up buying things just to fit in, end up swiping our credit cards to just be in a party or even purchase stuff that we don’t really need, only because someone else has it.
To break bad spending habits, consider how they make you feel. Most spending feels fun in the moment and creates remorse and regret, a few minutes or hours following the purchase.
Recognising these habits now could save a lot of money and stress later. Good spending habits might be a tough call at first, but they produce a lifetime of rewards! Read on to discover how you can break bad spending habits and create new, healthy ones.
Spending Without a Budget
If you don’t have a monthly budget, you will run out of money even before you know it. If your expenses are always more than your income, then you’re always going to be spending money that you don’t have. Too many people live on more than they make and use credit cards to cover the difference. You can resolve this habit by reducing your expenses and relying only on your income to pay for your wants and needs.
Emphasis on needs. Be aware of your spending triggers and consciously avoid them. Remember, when you have a plan in place and know how to live on a budget, you’re ahead of the game.
Not Tracking your Spending
Going about your day, using cash or plastic, without knowing how much money you truly have, poses an immediate threat to your wallet. Not knowing can make you feel more financially secure than you actually are, causing you to spend more comfortably.
Without knowing how much you have to spend, it’s quite logical that you would spend more than you should and fail to fit into your budget later on.
Make sure you know how much money is in your account, at all times. Choose two days each week where you will access your bank account information and run through your account debits, and see how much you have left to spend.
These frequent checks will also help you become aware of your spending patterns and will serve as a reminder the next time you set out to make the same purchase.
Succumbing to Peer Pressure
It’s often tempting to increase your social spending, whether it is to spruce up your house or to attend more happy hours. We have a tendency to assume that we should be able to afford the same lifestyle as our peers, but it’s important to remember that everyone has different financial situations and goals. You know your own limits, so take charge of how you spend socially. When a friend buys something lavish and you are tempted to get it as well, reevaluate. Is it something you actually want, or do you just want to fit in? Better yet, is it something you could see yourself getting a lot of use out of? If the answer is no, perhaps you’d be better off saving your money and investing in something that makes you happier later on.
Strictly avoid impulse buying. If you need more help, read up on how you could stop yourself from impulse buying.
Using Credit When You Have Cash
This habit is known to be one of the largest factor to cause debts. Choosing credit over cash when you have the cash only facilitates temporary convenience. This convenience of holding on to the money in your wallet comes at a cost. The credit card bill peaks to alarming figures over time due to non-repayment. Chances are, if you don't want to pay for it today, you're not going to want to pay for it tomorrow. To change this habit, you must be willing to pay for what you want with the money you've earned. While you can postpone payment by using credit, you'll end up paying more than if you spent your cash.
You should use cash that is available, to make everyday purchases like groceries, gas, food, clothes, and entertainment.
Remember, the appeal of credit cards is the ability to pay later for items that you buy now.
Getting Caught in Debt Cycles
When you use credit cards to pay off other cards, and loans to pay off other loans, you're not paying off anything. You're just shuffling your debt around and incurring more debt each time you do so. So, when you use debt to pay off debt, you end up worse off than when you began. Using debt to "pay off" debt might be beneficial if you can transfer a balance from a high-interest rate credit card to one with a lower limit.
Transferring a balance once or twice to take advantage of a better rate is different from continually transferring balances to dodge credit card payments.
The same rules apply to personal loans. While loans can help you fix a temporary situation with ease, go for it only if you absolutely need it.
For example, taking a loan for a medical emergency is different from borrowing money to buy a new wardrobe. While the first reason could be avoided by getting a medical insurance plan beforehand for a fraction of that sum, the latter is just not a need, it’s a want. Be clear to know the difference!
Habits are hard to break, especially when it comes to your daily spending behaviour. However, anything that puts more money in your pocket is worth the effort! If you spend some time organising and spending your money wisely, you’ll reap the rewards soon after. Happy Saving!
