It’s plain and simple. We all know that to build our wealth and reach financial freedom, we need to spend below our means; that is to spend less than what we earn. But, why does it seem so difficult for most of us? First of all, we need to examine and understand ourselves and know the reasons why we tend to overspend. Once we realize and acknowledge the reasons, then maybe we can understand what we are doing, deal with them, change our spending ways and eventually spend less.
People overspend for three primary reasons
They don’t know how much they’re spending in comparison to their income and therefore spend too much;
They spend emotionally;
They actually lack sufficient income for their needs.
Know how much you’re spending
Having a budget plan is the best way to know where you stand financially. Keep a close account of your expenditures and reduce them when necessary and you probably will stay within your budget. Many people spend too much money because they don’t have a clear idea of their financial picture. They buy to gratify immediate needs and worry about balancing their finances later. They have poor planning. They know what they would like to purchase, but fail to see whether it fits within their budget plan.
In a world of consumerism and easy access to credit cards, some people tend to think that they now have more access to more money. They think that their credit cards are real cash. It makes them feel like “I have money for spending”. What some people don’t realize is that there is always a responsibility attached to using a credit card. Always ask yourself. Can you afford to pay the total purchase price in cash instead of the monthly payments?
It is easy to get into spending trouble with charge accounts. Buy now, pay later is the best policy if you always bear in mind that “later” is coming very soon, let’s say around the first of the month. Also, too many charge accounts can cause trouble. You charge P150 at one store, P50 at another, and P100 at another store. None of these purchases are major, but they add up. When the bills come in, you will find yourself juggling your available money trying to pay all the charge discounts.
You can be in debt clearly by buying too much on credit on-time payments. Never commit yourself to a payment schedule that you’re going to have trouble meeting.
If you lack discipline, start now to be firmer with yourself. Emotional spending becomes a sort of a coping mechanism especially for a person who is experiencing some trauma or stress. When we’re unhappy or under stress than we can handle, we tend to react by overdoing something like eating, drinking, smoking, or overspending. We have been hurt so we pamper ourselves. This makes us feel better and secured. They may be all right once in a while, but if it happens often, you will ruin your budget and eventually ruin your financial life.
Impulse buying is a prime money waster. Before you do your grocery shopping, have a list ready and buy nothing that isn’t on the list. This goes the same before you go to department stores. Many people buy clothing they don’t need because it’s on sale. They couldn’t resist such bargains and it seemed like saving money to buy them. In the long run, you end up not using it because you have nothing to match that clothing and you need to buy another one that would match it. By the time you were able to buy it, the one that you bought at bargain goes out of style. So buy bargains only when you need the item on sale.
After you have figured your indispensable expenses and subtracted them from your yearly income, you may find nothing left. If so, take another look at your fixed expenses such as Rent, Car payments, Cable, DSL, Food, and Beverages and see whether you can save on any of these fixed expenses. You may negotiate for lower monthly payments as well or look for additional income.
Knowing these triggers would help you stop some destructive behaviors. If you are determined to trim down the amount of money you spend, you can always do so. The only way to stop overspending is to change your mindset to paying yourself first. Once you receive your income, always set aside a portion of it to save before you do anything else.
It’s plain and simple. We all know that to build our wealth and reach financial freedom, we need to spend within our means; that is spend less than what we earn. But, why does it seem so difficult for most of us? First of all, we need to examine ourselves and know the reasons why we tend to overspend. Once we realize and acknowledge the reasons, then maybe we can understand what we are doing, deal with them, change our spending ways and eventually spend less.