So many people tend to spend money even before they earn it. This explains their dependence on credit cards and fintech products that allow them to shop on credit. Quick gratification is a behaviour synonymous with today’s generation though a lot many millennials still find it difficult to track their spending habits.
Reining in spending habits is not easy. Spendthrifts are pervasive as many people get caught up in the moment and splurge a lot of money on non-essential items. This impulsive buying behaviour has pushed many people into debt in the past, thus, causing them to be perennially trapped in the cycle of debt repayment.
One way to refrain from this behaviour or control your spending habits is to check if your purchases are in line with your financial goals or if they make any sense. Apart, you must check to what extent your rampant spending habits affect your savings and investments in the long run. Unless you realize why and how you spend your money, there is no way you can keep a track of your expenses or keep a check on them.
Controlling your spending habits is not difficult if and only if you are willing to do so. The following steps may help you against your urge to waste your earnings relentlessly.
Do not spend unless saved
The age-old formula of saving after what you have spent is now obsolete. You must first focus on your earnings, then your savings and investments. Only when these are all in place, you may focus on your expenses too.
Earnings – Savings – Investments = Expenses
This will ensure that your savings and investments do not get affected because of your tendency to spend. As said by the proclaimed investor Warren Buffett, “Do not save what is left after spending; instead, spend what is left after saving.” This way, both your savings and investments will remain intact while helping you take charge of your expenditure too.
Know your shortcomings
Are you aware of the areas where you spend most? Do you spend most on clothing or on jewellery or on entertainment? How much do you spend on your daily essential items? Realizing this aspect can assist you in checking where your money is going and identifying areas where you may be overspending. This also calls for the need to have a budget in place. When creating a budget, it’s of utmost importance that you are honest with yourself and include all of your expenses, including non-essentials like entertainment and dining out.
Know your needs and wants
Needs are different from wants. Do not let this confuse you and mistake your wants for needs. Needs are your absolute necessities, something which you cannot do without. Wants stem from desires and can sometimes be unbridled, if not checked in time. One way to effectively divert your focus on your wants is to delay spending on your wants. Keep your mind fixated on your needs such that you forego your habit of spending on products and services that do not matter.
Spending is a habit that most of us are afflicted with. Reckless spending has caused many families to be doomed. As goes the famous saying “Spending is quick; earning is slow”, thus, explaining the need to rein in our spending habits.