How To Get Control Of Your Spending Habits?
Ever got to the end of the pay week and wondered why there is no money left in your bank account? Or why, even though, you have had pay rises, you never get any closer to paying off that credit card, or the pipe-dream of saving a house deposit?
Getting control of your spending habits is a lot like getting control of your eating habits if you are trying to lose weight. It starts with having a hard long look at what you are doing now.
Step One – What Are You Spending?
It’s the first step, and also the most important. Even before you have a budget, you need to know what your spending habits are now. Most dieticians will ask you to keep a food diary for a week or two, when you are trying to change your eating habits. Money habits are the same, you need to know why, when, and where you are spending money before you can change your patterns.
Have you ever done the exercise of listing all your expenses, looked at your salary and wondered where all those theoretical savings are? Well this exercise will provide the answers.
There are only two rules
- Record everything you spend, and
- Record it when you spend it – don’t try to remember later.
You must track everything you spend for a week or longer. How long? Tracking a pay cycle makes a lot of sense for many people, so that’s a fortnight for most of us. And pick your time – you are looking for your regular spending patterns, so starting the week before Christmas is a bad idea.
By everything, I mean everything– every bus fare, every coffee, every chocolate bar! Write it an old-fashioned notebook, or use an app on your iPhone – it doesn’t matter how you record your spending, just that you do. Don’t wait until you get home either, you will, forget to write all of the amounts down, either deliberately or otherwise. Make a note as soon as you spend it. If your friends question your sanity – tell them you are taking part in a paid consumer survey! Cash, EFTPOS or card , it doesn’t matter record it all.
Step Two – Analyse Your Spending
Now you have collected the data – you can do some analysis. Was there anything in your spending that shocked you? Did you have any idea that you were spending quite that much of coffees or magazines?
Group your expenses into essential and could do without. Can you see when you spend money and it’s got nothing much t o do with the items you’re buying. When you are stressed out a work do you spend a fortune in the clothes shops on the weekends? Do you buy books at lunch time just because you are bored?
Many of us tend to overspend when we are out with friends Does it make you happy? We don’t want to look out of place, the person who hesitates at the price of the restaurant, or pauses before ordering a nice bottle of red for the table.
You don’t need to be a psychologist to know that many of us spend money to present an image to the world. Not just in the way we dress, or what car we drive, but also the way we act in social group. Throwing money around may well make you feel good at the time – but think about it. Is it more important to impress, than to save for a home? Are real friends really impressed by your choice of expensive wine?
Split up your spending Categorise by:
- Essential/not essential
- Time of day – do you spend more early in the week, or the weekends?
- State of mind – how were you feeling that day?
- Alone or with friends/ family.
Now you should have some idea of when and where your spending get out of control. You can now consider how to avoid, or moderate your behaviour in those circumstances.
Step Three – Mix It Up
Having insight into the patterns of your spending makes you more aware of where the money goes. In some cases, alternatives will be obvious.
Now you know the cost of the mediocre flat whites at the café, when you meet the girls for a weekly catch-up. Perhaps you can keep the catch-up – but move it outdoors for a walk. Instead of buying magazines and books, to read on the bus, dig out the library card and give it a work out instead.
For some people that will be enough – now that you can see where the money goes, you can stop the unnecessary spending and start saving.
For the rest of us you might need what you might call a “pattern interrupt”. You need to do something radical, for a period. Just long enough to jolt your brain out of the routine spending it’s used to.
Something radical could include:
- Spend nothing for a month. Only spend money that will keep a roof over your head, basic transport, groceries, and health care. Spend nothing else. It’s the equivalent of going on a fast at the start of a diet. You can’t do it forever – but 30 days – that’s surely possible? You’ll give your savings a kick-start too.
- Leave your cards at home and only spend cash. Work out a budget for day-to-day spending, and have the cash to hand. When it’s gone, it’s gone. Particularly effective for those of us who have forgotten what cash looks like!
- Put your credit card(s) on ice. Really – put them in a container – fill the container with water and put it in the deep freeze. It won’t hurt the card, but if you want to put something on the plastic – you’ll need to defrost it overnight and return the next day. You’ll be surprised how you forget to buy that “must have” item!
Step Four – Ongoing Control of Your Spending
How you manage your spending really comes down to personality type. Some people are happy to live by a strict budget; others set aside their savings first, and then spend the rest of the money. However you do it the steps above will help you become a lot more mindful of your spending habits, and therefore far more in control of them.
Getting control of your spending is really about taking control of your life. If you live pay check to pay check, you have few choices about changing jobs, getting more education on doing an O.E. Getting control of your spending allows you to control your life. I’m not saying it’s easy to do – I am saying it’s well worth doing.