Introduction
When economic times are good, people rarely consider how their current spending habits can adversely affect their financial future when times change. They may become accustomed to buying big ticket items, which require the use of a credit card. They buy things they may not truly need because they have the disposable income to do so. Or at least that is what they believe. Unfortunately, when times change and money isn’t quite so available, they wonder what to do and how can they survive.
It’s common knowledge that economic times are tough, not only in the United States, but also in many parts of the world. People are losing their jobs at an alarming rate and it doesn’t seem like that downward trend is even close to stopping. With each passing day, someone finds out their job may no longer be secure or they may already have been given their walking papers.
What’s a family to do when they’re used to spending what they want or when they no longer have the same income they once did? One thing they can do is reign in their spending and the amount of money they have going out each month by using these strategies to stop excessive spending. By following these strategies, families may be able to not only survive an economic downturn; they may also be able to thrive and come out ahead when the situation improves.
How to Determine If You Have Excessive Spending Habits
No one wants to admit they have problems with handling money, much less admitting to having bad excessive spending habits. They would like to believe their spending is normal and under control. This isn’t always the case. So, how do you know if you do have a spending problem?
Do you pay your bills on time each month? This is often the first sign of a spending problem. Rather than using the money earned at their job to take care of their living obligations, people with spending problems choose to spend money on things they want. They may feel they “deserve” the things they want instead of waiting to purchase it until they have the money saved. In other words, is this a want or a need buying decision.
Do you use credit cards to pay for everything? Once the habit has begun of using credit cards to pay for everything, problems generally begin. This may mean you’re using credit cards for everything from groceries to your utilities. By you’re putting everything on credit you may not be aware of exactly how much you’re spending each month. Many people simple ignore the problem by not really looking at the monthly credit card statements.
How do I know that? Because I did it a few times too. Oh sure, I paid the minimum, but I knew in the back of my mind, the credit card was close to its limit.
Do you feel the need to get a second job in order to pay your monthly bills? If you’re struggling to make your financial ends meet, you may think more income will solve the problem. However, what’s more than likely to happen is that you’ll simply use that income to fuel your spending habits if they’re out of control. Now, if you can get a part time job to help off set and pay down your bills more quickly, then consider that as an option, but only if you are willing to make the sacrifice.
Do you spend money to deal with stress? Some people eat in order to handle stress. Those with excessive spending problems use shopping as a panacea. Unfortunately, people that use shopping to make themselves feel better don’t realize how much their overspending can cause problems for them both now and in the future.
Do you make find yourself making impulse purchases? Or can you wait a little while to get something you want? If you’re unable to put off a purchase for something you want, you may want to consider how to reverse your excessive spending habits. Again, when money it tight, ask the question; is this a want or a need?
So, how did you do? Did you answer ‘yes’ to several of these questions? If you did, you may have a problem with spending. Don’t despair. Even if you answered ‘yes’ to all questions above, there is hope. You can use the ideas below to get your spending under control and help make your financial future look brighter. The key part here is to recognize you have a problem and then be willing to change your spending habits. We all have the ability to choose – what is your choice?
First, learn to recognize what it is that causes you to spend indiscriminately. Are you one who goes into the store for one or two items and then comes out with $150 worth? Or do you love to go to yard sales, flea markets, or consignment stores only to “look” and find you’ve spent more than you should? Once you recognize what triggers lead you to spend money you don’t have, do what you can to avoid those situations.
This isn’t to say that you can’t spend money. Obviously you and your family have to eat. You have to purchase the basic necessities of life and you have to have a home to live in. The point is, to determine what circumstances trigger you to spend excessively and do what you can to stay away from them. Have someone in the family who doesn’t spend money so freely do the grocery shopping. Take someone with you to hold you accountable for what you spend. Actually, be responsible is my short answer.
What in your surroundings tempt you to spend money? This may be going shopping with a specific friend; shopping while you’re angry or when you’re upset may also be a trigger. Rather than going shopping with your friend, suggest you do something else such as learning to play a sport. Instead of running to the mall whenever you’re angry or something has upset you, find a friend to talk to who can help you through those feelings.
Make a list of the items you must purchase. Once you have your list, do everything within your power to stick to the list and then leave the store immediately. Don’t allow yourself to browse if you know you’ll end up putting other items into your basket.
Limit the number of trips you take to the store or the mall each month. While you’re waiting for your next planned trip, make your list and set aside only the money you’ll need for those purchases. When it is time for your planned trip, take only the list you made, the amount of money you think you’ll need plus a little extra in case prices have increased. Be sure to leave your checkbook and credit cards at home. If you don’t have extra money with you and your credit cards aren’t available, you can’t spend extra money.
Think about every item before you spend money for it. Decide if you truly need the item or if it’s simply something you want. You can ask yourself if spending money for that item, is the best use for that money right now or should it be used to do something else such as pay bills, buy groceries, or place it in savings for the future. If you do decide the item is something you need, can you find it for less elsewhere or by waiting a little while before making the purchase?
Don’t waste what you’ve spent good money on. If items are still in good condition even though you may no longer need them, don’t throw them away. They may be able to be sold or donated which could benefit someone else. Another benefit of selling items or giving them to someone else is that the items don’t end up in landfills.
Consider other ways to obtain the items or services you need. Perhaps you have talents or resources you can offer in exchange for what you need. For example, if you play and teach the piano you may be able to find a mechanic to fix your car in exchange for teaching their child to play. Think about what skills you have, which may be valuable for someone else.
Another thing, and possibly the first thing you should do, is to create a family budget or spending plan. This will allow you to see where your money comes from, what it should be used to pay monthly, and how much extra you have at the end of each month. Below are some guidelines for budgets for those who haven’t used them in the past.
Develop a Budget or Spending Plan and Stick To It
Budget, it’s a word that many adults dread and many more avoid. They think the prospects of developing a budget or spending plan is akin to torture. By creating a budget, you’re no longer able to buy anything you want. They feel they’ll be deprived and won’t ever be able to have any fun. The truth is, a budget doesn’t have to be something to dread or be afraid of. Rather, look into your future and imagine a day a year from now, when you don’t have that credit card bill to worry about.
Developing a budget can do so much for your financial outlook. If you know how much income you have each month, what necessary expenses there are, and put some aside for the future you’ll also know how much discretionary funds you have available to you. Without a budget, you could be spending money you don’t have for items you don’t necessarily need. You may also be wasting money by purchasing items on impulse rather than trying to get the most value for the price.
Lack of a budget, including not knowing what happens to your money, can be catastrophic. By not knowing where your money goes each month, you may have a tendency to pay bills late. This not only causes to pay a late fee, if we’re talking about credit cards, it could also lead to interest increases which seem exorbitant. Fall behind too far on some bills and you may be faced with difficult financial problems such as bankruptcy, home foreclosure, having your vehicle repossessed, or being evicted from an apartment not to mention the detrimental affects non-payment of bills can cause to your credit rating.
It doesn’t matter if you’re making a minimum wage in your first job, or if you’re one of the top money earners in the country. Having a budget can be a financial life saver. You don’t have to hire a professional financial planner; you can create a budget or spending plan on your own. Once you have a budget that works for your family, do everything you can to adhere to it.
Here are some ideas to help you get your budget started.
One thing you’ll want to do before you setting up a budget is to stop excessive spending. In fact, without this step, it won’t matter what income you have, you’ll never have enough to pay your bills and start saving for your future. Your spending habits will keep this from happening.
Note – Purchase a small notebook you can keep with you. Write down everything you spend for 4 weeks. This means paying bills, money spent in vending machines, groceries, and every other purchase. If there are other people in your family, ask them to keep their receipts for each purchase and give them to you at the end of the day. This exercise will allow you to see where your money is going. In fact, this is one of the easiest and quickest ways to determine where all your money is going. Of course, you could use a software program to help you with this. Normally, something like Quicken is a good option.
Next, determine your income. How much does each adult bring home after taxes? Does a teenager contribute to the family finances in any way? Do you have someone living with you and paying rent? Does anyone receive SSI, disability, or payments of another kind? Add up all the income for each person contributing and then you’ll know what you have coming in each month. Yes, I realize that for many people this is simplistic, but why is the vast majority of people still broke? Its because they are not doing the simple things they have control over.
You may want to consider having your pay direct deposited. This option, offered by many companies around the country, allows you to receive your pay without having to wait for a physical check. It is also deposited into your chosen account so you have access to it without having to run to the bank, wait in line, or possibly miss depositing your check entirely.
Make a list of everything you spend money on each month and do the test above where you track your money for a 4 week period. Get down into the nitty gritty with this specific task. This would include savings, housing (rent or mortgage), insurance (homeowners, rental, and automobile), utilities (electric, water, gas and home phone), creditors (major credit card companies as well as department or specialty stores), and groceries. Don’t forget about internet, entertainment (satellite or cable television), property taxes, automobile upkeep (gasoline and maintenance), charitable giving, and family gifts throughout the year.
There are a number of websites available online which provide blank budget forms for people to download. You may want to find one or more of these to use as a guideline. Some also provide expected percentages for each category of spending such as allowing 28% of your total income for housing. The more information you can fill in on these forms, the better able you’ll be to create a budget that works for your family.
If you want an additional resource and straight talk, then one TV show to check out is called, “Til Debt Do Us Part”. Just Google it and you want watch some of her shows online. You can also check out her website Gail Vaz-Oxlade – Debt Free Forever for more tips and advice.
Begin by adding together your total income and placing that on one line of the pre-created budget or write it on a sheet of paper. Next add all of the expenses from the various categories requiring payments. Subtract your expenses from the income and look at the result. If you have money left over, that’s great! You can use some of that money to add to savings or pay down credit card debt. The problem comes when there are more expenses than there is money to cover them. This is when you realize there’s a problem and it’s time to get it under control before it’s too late.
What do you do if your family’s income varies each month because someone gets paid by commission rather than a traditional paycheck? You can still create a budget by creating a budget based on your lowest income months. This means you’ll need to keep track of paycheck stubs for a couple of months to determine what that number should be, but the exercise will be worth your time and effort.
When you receive a bonus or have better sales for the month, your income will show it. Rather than simply taking that extra money and spending it all on frivolous wants, put some of it aside for leaner months. You can also use extra income to pay down credit you’ve received in the past.
Cut Up Credit Cards – One Of My Top Suggestions
Some people who spend excessively don’t have a problem with actual cash in their hands. They do, however, have a tendency to spend without thought when it comes to using credit cards. It may not matter to them if they have a large balance and are paying interest for it each month.
Knowing what triggers you to overspend is a great step to getting your spending under control. Learn self-control when it comes to using your credit cards, or cash on hand, and you can begin to see light at the end of the financial tunnel.
If you find you simply cannot change your excessive spending habits, you may have to use drastic means to make it happen. You may have to cut up your credit cards and ask the accounts to be closed. Of course, you’ll still have to pay the balance you accrued, but you won’t be able to add anything to that balance!
Learn to Control Spending
It’s really hard to listen to friends, family, or co-workers talk about the new things they have. Maybe they bought a new car, a big screen television, or something else you’ve wanted. Even though you’d like to own the same things, there’s nothing that says you have to. You don’t have to fall into the mindset that you must “keep up with the Joneses.”
Maybe you’re used to going out to lunch with friends every day. Over the course of the month, that can add up to quite a bit of unnecessary spending. Look at the following scenario:
You spend $7.00 a day on lunch with your friends. That means you’ll spend an extra $35 a week, $140 a month, and $1,680 a year! You would be spending even more than that if you’re accustomed to eating at higher end restaurants where the prices are more. Now think, what else could you use that money for? I have cut down on going out for lunch to the point that I only treat myself say one time each payday. I have a friend who also did the same thing. You would be very surprised at how quickly those dollars ad up.
Instead of going out to eat every day of the week, take your lunch with you. Not only will you be saving money, you will also have more control over the foods and the amounts you eat. Your health will likely improve and you may find you start losing weight simply because you’re not eating such fat-laden meals.
Does this mean you can’t go out and eat with your friends on occasion? Of course not! Choosing to go out to eat once or twice a month still allows you to feel like you’re not being deprived and yet reigns in your spending considerably.
Look for other ways you can reduce spending by going through your budget. Obviously some things on your budget are fixed expenses, but even with those, you may be able to find ways to save.
Here is a list of ideas to get the creative juices flowing on other areas that you may be able to reduce your monthly expenses on. By no means is this a complete list, but a starting point.
- Satellite or cable television – Can you reduce the programming for satellite or cable television? Instead of having the “everything” package, can you do without all the movie channels you never watch?
- Cell phones – Does everyone in your family really need their own cell phone? In most cases teens and children simply don’t need cell phones; they just want them because their friends have them. Do you really need access to the internet on your cell phone or some of the other services which add to your monthly bill? In fact, this is one thing I did and removed my internet data package. Not because I had too or needed to. Its because I really couldn’t justify having it and using it enough.
- Electricity – Do you often go through your home and find lights on in rooms that are unoccupied? If you do, your family is wasting electricity. What else are they leaving on?
- Does the television run when no one is watching it?
- Adjust your heating or cooling to help reduce costs. It may be a little cooler in the wintertime or warmer in the summer than you’re used to, but it can make a dramatic difference in the amount you spend monthly for your electric bill.
- Transportation – Use public transportation where possible. It may be this isn’t an option, but you may still be able to save. Find other people to carpool with you and share the expenses. Be sure to keep your tires properly inflated and car tuned up. This will reduce wear and tear on your car and help it to run better.
- Food – Stop wasting food. Eat leftovers rather than throw them away. Plan your meals prior to going to the grocery store. This will help you make a list of items you’ll need so you can avoid impulse purchases. Buy only the items on your grocery list. Use coupons to help you save more money.
- Finally, by having a meal plan, you can be sure you purchase everything you need for each recipe so you can avoid frequent shopping trips to pick up items you might have forgotten.
Spend Only What Is Necessary
Don’t allow yourself to add anything else to your credit cards or debt load. This means you’ll need to use self-control or restraint when you’re tempted to spend. Don’t give in to your desire for immediate satisfaction; learn to use and appreciate delayed gratification.
Rather than going ahead and making a purchase when you see something you want, start a list of items you’d like to purchase. You can begin saving money to purchase that item with cash instead of using credit. Waiting until you’ve saved the money will accomplish a couple of things:
First, it will give you a chance to have a cooling off period. You may decide after a week or so that you really don’t need that item any longer.
Second, you will be able to do some research to see if you can find the same item for a cheaper price. It may also be, by waiting, that item will go on sale which will allow you to get it at a reduced price.
Conclusion
There are millions of people across the country who struggle with spending more than the income they make. It’s not something that is specific or limited to one country or one ethnic group. People from all walks of life may struggle with this problem.
Fortunately, you don’t have to be a victim of consumerism. You can learn these strategies to stop excessive spending. It may not be an easy thing to do, but the results will be worth it. You will be able to break the cycle of spending more than you make. It may also be possible for you to bring down debt and begin saving for the future.
