When you’re struggling to make ends meet, one of the first lines of defense is to rein in your spending. But that can be easier said than done. Not only are fixed expenses like housing and health care getting more expensive, but there are also external social pressures that can drive us to live beyond our means.
But if you can control your spending, your money won’t control you. If you are able to reasonably live lean and mean, you will still be able to enjoy life. Financial planners we interviewed said they have found people who have saved successfully for their golden years are those who don’t spend beyond their means and work diligently to put money away. People would love to hear more detailed information about it. It will be a great topic to discuss in the podcast. Have a spotify account and want more visibility? The easiest way is to buy spotify plays.
“I REALLY FEEL LIKE [CONTROLLING YOUR SPENDING] IS THE KEY TO BEING ABLE TO GET WHAT YOU WANT, BUT IT DOES MEAN THAT THERE HAVE TO BE SACRIFICES.”
Lauren Lindsay, a financial adviser with a Covington, La.- based firm
Table of Contents
How To Break Your Bad Spending Habits & Control Excess Expenses
Identify Unnecessary Spending
Paul Franklin, founder, and principal of Franklin Capital Strategies in Arlington, Va., suggested spenders go back at least three months into their transaction history and see specifically where the money went. Then you can try cutting back on discretionary expenses that you don’t necessarily need.
Download an app like Mint or Personal Capital to identify where your spending is going. These apps let you organize expenditures by category so you can really get a good overview of where your biggest spending buckets are, such as restaurants, rent, or bills.
But, Franklin warned, it is important to focus on expenses you don’t really need, not trim the essentials like bills, insurance, taxes, and food.
Alexander Koury, a certified financial planner based in Phoenix, said he bought a cup of $3 Starbucks coffee every day 10 years ago. One day he decided to see how much money he spent on coffee in a year — it was almost $1,000. Shocked, he decided to start making coffee at home.
“THE IMPACT OF SEEING THE BIGGER DOLLAR FIGURE CAN BE UGLY, BUT IT CAN CAUSE SOMEONE TO MAKE A CHANGE FOR THE BETTER,”
Once you get an accurate sense of your finances, you may think twice before purchasing that $1,000 Canada Goose parka.
Understand Your Spending ‘Hot Buttons’
Some people are able to give up certain costly pleasures without a problem; for others, those expenses are the most tempting of all. That may be because you’ve formed an emotional attachment to something, like a shopping spree after a bad day at work or an expensive family vacation because you miss the trips you took as a child.
The things that you are emotionally attached to are your spending weak points, or what Lindsay calls spending “hot buttons.”
“WHERE PEOPLE HAVE TROUBLE SPENDING ARE THE THINGS THAT GIVE THEM PLEASURE. SO A LOT OF TIMES IT’S NOT NECESSARILY THINGS THAT THEY NEED. IT’S A THING YOU LIKE TO DO, YOU WANT TO DO.”
Different people have different “hot buttons.” If you have tried to track your expenses and look at your budget, you will have a pretty clear idea of what your spending weak points are, as you probably have routinely overspent on them. It’s important to identify them because those are the areas where you need to be focused on tackling.
Once you’ve identified your weak spots, you don’t have to give them up altogether. Next, we’ll explain how to plan and budget for them so you don’t go overboard.
Plan Ahead So You Don’t Deprive Yourself
Once you identify your spending “hot buttons,” be it a material item or an experience you enjoy, don’t quit them. Experts say that strategy usually won’t work. The more you forbid yourself from doing something, the more you want to do it.
A better method is to scale back spending on those areas. There’s no formula on what you should spend on certain things, but you’ll need to come up with an amount that’s within your budget and that you are happy with.
Lindsay, a self-proclaimed bookworm, gives herself a monthly book allowance of $50 instead of forcing herself to stop going to bookstores altogether. If you love vacations, set up a savings account for your travel fund. With each paycheck, save 5% for that travel fund and take one nice trip a year.
Similarly, you could set a fixed dollar amount you’re able to spend on a given “treat.” If you can’t move when you see the latest limited edition Nike kicks or you cannot stop yourself from stocking up on months and months of supplies at Costco, put yourself on a monthly allowance.
Use The Cash-Only Approach
Sometimes controlling spending means setting up physical barriers to make spending much more difficult. Psychologists have proven that people are likely to spend more with plastic than cash because making concrete cash purchases is a more painful experience, emotionally.
For a truly aggressive approach to budgeting, withdraw enough cash each time you are paid to cover your essential expenses. Put the exact amount you need for each essential — like groceries, gas, etc. — in an envelope and resolve to only spend the cash you have set aside.
This method was popularized by money-saving guru Dave Ramsey. Other methods focus on removing the temptation of credit cards by making them more difficult to use. But that doesn’t always work.
Leon C. LaBrecque, a Troy, Mich.- based certified financial planner, said he once asked his clients to put rubber bands around their credit cards, put them in a paper cup of water and freeze the whole block. He told them if they were truly eager to spend, they could thaw out the block of ice. It helped cut incidental expenses, LaBrecque said, but it didn’t last forever. His clients eventually went out and got new credit cards instead.
That’s why Lindsay advised those who have trouble with spending on certain things to use cash for those items only. So put your special allowance — weekly or monthly — in cash in an envelope, and put that envelope in your wallet or purse. You use that cash for things you have a hard time with spending. And when the envelope’s empty, that’s the end of it for this spending cycle.
Shop With A List. Eat With A Plan.
For avid shoppers and diners, having a budget for your favorite spending category may not be enough — you probably need a more detailed plan before stepping into a grocery store, a shopping mall, or a restaurant.
“BE VIGILANT ON THE DAYS YOU COOK, THE DAYS YOU EAT OUT, DAYS YOU ALLOW YOURSELF TO BUY COFFEE RATHER THAN MAKE IT, DAYS YOU BROWN-BAG YOUR LUNCH VERSUS BUY. I’M NOT SAYING NEVER EAT OUT AGAIN, BUT PLAN THOSE ACTIVITIES SO THEY DON’T CREEP UP IN FREQUENCY.”
Kristin C. Sullivan, an investment adviser from Denver
Sullivan suggested a reasonable plan would be eating dinner at restaurants and buying lunch twice a week respectively.
To avoid buying more than what you need, you probably don’t want to go to a grocery store when you’re hungry. Instead, go after a meal with a shopping list and stick to it. If you need a pair of sandals for a specific occasion, go directly to the shoe store in the mall and avoid wandering around clothing stores after you’re done shopping.
Follow The ’24-Hour Rule’
When it comes to battling impulsive shopping, there’s a simple trick — instead of making an impulse buy, give yourself 24 hours to make a decision.
If you visited a brick-and-mortar store, leave and tell yourself you’ll either return or purchase the item online the next day. If you were online shopping, just leave the item in your shopping cart for 24 hours.
After the purchase sits for a day, you might find you forget about it altogether or that you’ve lost interest in it. If a day is not long enough to cool your mind down, give yourself 48 hours or three days before revisiting the store or your shopping cart.
“MOST OF THE TIME YOU WILL HAVE FORGOTTEN OR FOUND SOMETHING ELSE TO LOOK AT.”
Leon C. LaBrecque
Stay away from temptations, like newsletters and driving routes that take you past your favorite stores. If it’s truly challenging for you to get your spending on material items under control, it may be wise for you to walk away from the temptation.
Marguerita M. Cheng, a Potomac, Md.-based financial planner, advised people who periodically go on shopping blowouts to unsubscribe from email newsletters and catalogs, and avoid going to the mall or shopping out of boredom.
Today’s ubiquitous digital advertising allows retailers to know what shoppers like, which makes impulse buys much easier. If you tend to buy things that show up on your social media page that you’ve been searching for or thinking about, consider investing in a good ad blocker that helps make the ads specifically targeted to you invisible.
Set Long- And Short-Term Goals. Then Revisit Them.
Do you want to retire at age 65? Do you hope to repay your student loan debt in 10 years? Are you planning to buy a house or have a child anytime soon? Do you want to travel around the world? Do you plan to pursue an advanced degree? Maybe consolidate some personal debt?
If so, write down your goals, and then come up with savings and spending-control strategies to make financial room for them. Revisit your long-term and near-term goals when you feel like purchasing things that you don’t need, and remind yourself of your life priorities.
Lindsay said she once had two clients, a couple who hoped to save money for their future kid’s education but couldn’t come up with the money to do so. After analyzing their spending habits, Lindsay found that between the two of them, the couple spent $400 a month buying coffee.
“YOU COULD TAKE THAT $400 A MONTH AND PUT IT INTO A 529 PLAN AND START TO BUILD A MAJOR COLLEGE SAVINGS ACCOUNT”
They listened, and bought a coffee maker and travel mugs. Like Koury, they started making coffee at home. The couple didn’t forgo the thing that they love — coffee — but were able to work toward their goal of saving for their child.
Get An Accountability Partner
Reining in your spending is no easy task because you are ultimately sacrificing current pleasures for your future life. It’s a good idea to have an accountability partner who can watch over your spending and remind you of your goals, Koury said. They will help you stay on track with spending control; this person could be your significant other, best friend, or a financial planner.
Meanwhile, don’t be too harsh on yourself. Koury said it’s fine to have one challenge point when you go over your spending limit as long as the expense doesn’t get out of hand. It’s also important to pat yourself on the back for good behavior and reward your discipline once in a while — because that “yes” moment is going to keep you going.
6 Signs You Have A Spending Problem
There are countless reasons — many beyond your control — that could make it difficult to make ends meet. Medical emergencies, unexpected job loss, or the death of a spouse can easily send your finances spiraling.
For some people, however, it really can come down to a simple reason — you have a problem controlling your spending. If you hope to control your spending, the key is not to ignore the early warning signs. When we asked a dozen certified financial planners for some common signs of overspending, six common themes emerged. Watch out for these red flags:
- You’re maxing out your credit cards each month. If you hit the limit on multiple credit cards each month and aren’t able to pay balances in full, it’s a sign that your lifestyle is unsustainable and you should reduce your expenses.
- You make impulsive purchases on a regular basis. It could be a car, a boat, a pair of designer shoes or luxury travel. You just can’t help buying things that you love or want and leave your budget — if you have even one — completely behind.
- Overspending on small items or services. You may have no idea where your money went, but if you add up transactions that you make without thinking, that number would probably be astonishing. That daily coffee, weekly massage and monthly Game Box subscription don’t seem too pricey individually, but as a whole, those items could certainly be enough to throw your budget out of whack.
- Your eating-out bill exceeds your grocery bill. Eating at home is boring. You don’t have time to cook. You wind up spending so much on eating out or takeout food that you go over your budget every month.
- Your closet is full of clothing that still has price tags. E-commerce has made it easier for you to just hit “buy,” so you don’t feel you are spending money at all. This can be a major debt trap for people who struggle with impulsive shopping habits.
- You’re missing bill payments. If you are waiting to pay bills due to being low on money — or worse, routinely making late payments — you need to manage your expenses.