Have you ever heard the saying “money is burning a hole in my pocket”? Basically when you have money you gotta rush out and spend it. Does that sound like you? “Born to spend.”
If you want to change your financial habits—say cut back on impulsive purchases and save a bit—what can you do?
If you are a spender, you will find yourself making excuses for your purchases. Whether you are a frugal spender of an out of control spender, you can break the spending habit and reach your saving needs by budgeting.
Change the way you think
How you spend your money is as important to your financial success as your decision to save or get out of debt.
You need to start thinking like an actual saver. Easier said than done, right? To do this you have to start asking yourself tough questions before making purchases. Some of the questions you must ask yourself are:
Do I REALLY NEED this?
If I actually need it, is there a cheaper alternative or can I make it myself?
If I need to replace an item, is there a way to make the item I do have last longer? Or can it be fixed?
To think like a saver, you have to think about the future. If you spend money now, how will it affect your goals later? If you want to spend R5000 on a new sofa, that’s a R5000 less towards a dream home or a comfy retirement.
Stop unconscious spending
Some people like to joke about being a shopaholic. But compulsive spending, otherwise known as retail therapy, is a thing. For most of us, spending on impulse because we want it now is the problem. We see something and buy it before we think about what’s in the bank account. Or about our financial goals, for that matter.
Do a quick review of your spending yesterday. Did you:
Buy a coffee, latte, smoothie or any other drinks?
Grab a snack from the vending machine at work?
Stop for take-out on your way home?
Go out for lunch, dinner, drinks with some friends or co-workers?
Tap the Buy Now button on your Kindle or Audible app?
A couple of rands here and there. Can that really make a difference? In a day or week, no. It can’t. But over time it adds up. Let’s say you unconsciously spend, R 50, 5 days a week. That’s R13,000 a year. Now we’re talking about some real money.
So are you never going to get to eat lunch out again or get your favorite beverage on your way to work again? Of course not. The purpose of this exercise is to get some awareness of your unconscious spending. You can’t change behavior until you acknowledge it exists.
Track your spending
Reading articles on tips to save money would be futile if you don’t have an efficient way to track your spending. If you want to become the boss of your money, you would need to change your actions with money.
Yes, I know you’d much rather be in denial about how much you’re actually spending. It makes buying things you don’t need so much easier. I remember when i first started tracking my expenses, I was shocked to see how much I was spending on unnecessary things.
This should be done every single day. Budgets are blown to shreds when you don’t track and also watch your expenses.
Create a Budget
Create a budget that is realistic. To do this, you really have to know where your money is going. One of the most important parts of a realistic budget is making sure every rand of income has a plan. Here are some basic steps to help you get started on creating a budget.
- Figure out your income & your expenses.
- Subtract your income from your expenses. Do you have money left over? Make sure it has a plan and is being used for saving or retirement.
- Once you have all your income allocated for, make sure you have a plan in place.
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Create a fail proof plan
As a spender, it takes a lot of motivation and will power to stop yourself from unnecessary spending.
Once you have created your budget, use automatic transfers for your savings. There are a few different methods you can use for your budget. One method is Cash Envelops.
In this method you organize the amount you have to spend in each category into envelopes. When there was no more money in the envelope, that was it, You have nothing left to spend. Seeing that you only have R200 left in your grocery budget makes it easier to choose between what is necessary and what is not. Talk about a reason to stick to the grocery list!
There is also the “6 jars system” created by T Harv Eker.
Use cash, not card (if you can)
For some reason it’s way easier to spend more than you should when you’re buying with a piece of plastic. You swipe it and beep, done. But that right there, is the danger.
I notice I am WAY more conscious of how I spend when I can actually see the amount of rands in my wallet decreasing. So if you’re a really stubborn spender, this could be your way to saving.
Challenge Yourself to Reach Your New Goals
Put your willpower to the test by buying the bare necessities for one month. You’ll be amazed by how little you actually need.
You’ll also be able to identify the things you don’t need, but simply like to have. Do you like using your gym membership because it helps you stay active? Keep it. Does your weekly visit to the chiropractor keep your back in tip-top shape? Keep going. If it fits into your budget (and doesn’t cause you to go into debt), you can spend money on it.
The key to stop your overspending is creating better money habits. And being intentional with what you spend your money on. Don’t step into a store again without a budget and a plan!
Going from a spender to a saver was not easy. We are human, we make mistakes. Don’t beat yourself up if you make a spending hiccup after you implement your plan and budget. Pick yourself up, note the mistake, learn from it, and move on.