Which category of spender do you fall into?
A) You invariably spend more than you earn each month, and find your credit card balance creeping up over time;
B) You spend every last cent of your pay packet, and find there’s never anything left for you;
or
C) You know exactly where every dollar goes, and your savings balance is making steady gains each month.
If you’re reading this, then chances are pretty high that you fall into one of the first two categories. In fact, less than 20% of income-earners are actively aware of where every cent goes, have a clear goal for their money, and fastidiously use a budget and savings plan.
Our constant focus on earning more is often a big distraction that doesn’t really solve our culturally ingrained problem of overspending. Ironically, your problem with overspending is NOT a lack of money. In fact, we are among the wealthiest countries in the world.
Instead, a combination of factors drive us to overspend each month, ranging from convenience, a sea of advertising, a lack of financial goals and clear direction, desire for instant gratification and never having been taught basic financial skills.
No matter what the drivers, overspending (defined as either spending more than you earn, or spending all of what you earn without saving for future goals) causes huge pain and frustration, and has the power to damage your relationships.
If you want to save your marriage, and live a money-stress free life, then here are 7 of the best tips to curb your overspending habit.
If you genuinely desire a breakthrough in this area then I urge you to print out this article and read it morning and night until it’s imprint has been burned into your mind.
1. Have a really clear financial goal and work on your beliefs
Spend some time thinking about what you really want. What are your long term goals? Do you want to be able to take time off work for children? Raise a deposit for a home? Be debt free? Save for your retirement?
Whatever it is, you first need to know that it’s possible to achieve (I’ve seen people pay off debts of tens of thousands and then go on to build a rock solid investment portfolio) and have that goal foremost in your mind. Every. Single. Day.
Creating a vision board with images of what you want to achieve has a powerful impact on your mind as our brains are wired visually. Something only seems real if we can see it. Here’s another way to create a visual reminder for when you’re about to spend money – write your goal on a post-it note and stick it to your credit card.
2. Change your lifestyle
This might seem like a biggie, but if you’ve done a really good job on step number one then your motivation for number two will make this a whole lot easier. If you’re overspending, then chances are high that your whole lifestyle needs an overhaul.
Do you spend time shopping for entertainment? Are you dissatisfied with the size of, or the furnishings in, your home? Do you eat out at restaurants more than you eat at home? Is driving a new car and replacing it every 3-5 years one of life’s priorities for you? If you answered yes to any of these then they leave clues that you may be overspending.
If you had lived in the 1940s your lifestyle, and that of all your friends, would have looked very different. Eating out would have meant visiting a friend’s home for a meal. If you had been wealthy enough to purchase a family vehicle you would have kept it for a lifetime. The size of your wardrobe would have been about an eighth of its current size, and you would have been content with one nice outfit for Sundays, a few work shirts or dresses, and a couple of pairs of shoes. And your past times would have included going for a picnic, an outing to the beach or park, going for a drive in the countryside or playing cricket in the backyard.
Our lifestyles today are shaped around consumer ‘events’. We have been taught to worship at the altar of big business and big credit. Advertisers catch our eye at every turn and make us feel worthless and vulnerable without the shield of whatever it is they are selling.
But no matter how much we buy, none of it makes us happier. That’s because ‘things’ cannot fulfil us. Life satisfaction is predicated on a number of factors such as positive relationships, meaningful work, service, saving and giving.
Let your focus be on intrinsic happiness from things like service, work and delaying gratification, rather than on convenience and looking good, and you’ll find that you will just naturally spend within your means, and start to accumulate the wealth you desire.
3. Change your associations
Associating with people who want the same things is crucial if you want to permanently change your habits. If your friends are all overspenders then it will be very difficult for you to save.
So does that mean you need to ditch your friends? In some cases yes, if your friends are all living way beyond their means.
So how do you gather people around you who are living the way you want to live? The easiest way to do this is simply by visiting the library and borrowing any one of the thousands of books about wealth generation and frugal living. By doing this you will plug into the mindset of people who are successfully doing what you desire.
Over time, by changing your own habits first you will naturally gravitate towards people who are on the same page.
4. Track your Spending
Spending leaks can happen to the best of us. A four dollar coffee here, a five buck magazine there, driving to the shops every day for one or two items instead of doing a weekly grocery shop: little expenses add up to a lot over time, and could mean the difference between you reaching your financial goals or not.
A simple fix is to take a notebook and write down everything you spend money on over the course of two months. You could also use an expenses tracking app such as this one. But you may find that as soon as you stop tracking your spending that you fall back into old habits. This is why we recommend getting a system that you can use for life that’s perfectly customised to you and your lifestyle.
5. Understand your spending triggers
Do you shop when bored or needing a distraction from life’s pressures? We are inherently creative beings, and need activities which allow us to create. Boredom is often a sign that we need an outlet, and spending money only ever provides temporary, unsatisfying relief.
You already know your emotions and psychology play a core part in prompting you to spend but none of us are immune to the power they hold over us, unless perhaps you’re a serious, hard-core meditator.
The trick is in becoming aware of which emotions trigger you to open your wallet, and then replacing spending with no or low cost activities that help you shift those hard emotions while also giving lasting pleasure.
Identifying a few no or low-cost, fun activities is an important part of the process. Get yourself a pen and paper right now and write down 10 things you could do that don’t cost a thing and that also make you feel good. Reading, creative writing, kicking a soccer ball with a mate or your child, going for a bush walk, going for a swim or a surf or tidying a sock drawer are all things that leave a lasting pleasure imprint and make you forget that you needed to buy that ‘thing’ so badly.
6. Get together a good Spending Plan
Budgets have a received a really bad rap over the years. We’re all told to do them at the start of every year, but how many of us actually follow through and stick to a budget throughout the year? That’s because budgets are fundamentally flawed. A budget will tell you it’s possible to spend less than you earn, but doesn’t really show you HOW to achieve it.
A Spending Plan, on the other hand, factors in time and cashflow at various times of the year and allows you to see how to pay for all your regular expenses, unpredictable expenses and life goals.
Tracking your spending then becomes redundant because a good Spending Plan will factor in all your pre-programmed expenses through the year and then tell you what your bank balance needs to be today to cover all those expenses. This is a much easier proposition than writing down everything you spend money on and still not really knowing whether you have spare money to spend or not.
7. Use Cash only
Did you know that participants in a famous research study paid 80% more for a baseball ticket if they used credit than if they paid cash? That pesky little plastic card has the effect of removing you ever so slightly from your actual money.
By paying only with cash you force yourself to spend only funds which you have (unless you get a cash advance on a credit card which will see you get slammed with interest from day one!).
At the start of the week withdraw only the amount of cash that your budget allows. Keep it in various envelopes entitled ‘groceries’, ‘eating out’, ‘entertainment’ and then use the cash when you need it. If you see funds are getting low towards the end of the week then you’ll have to figure out a way to make your money stretch! Necessity is the master of invention as they say.
Recently some of our grocery funds needed to be used for another pressing purpose, and it meant that I had to get creative with what we had for meals that week. I suddenly discovered a whole heap of non-perishables at the back of our pantry cupboard which, put to good use, made us some delicious meals and allowed us to stay on target with our Spending Plan.
Where there’s a will there’s a way!
Summary
Learning how to stop spending money is definitely a challenge, but it can absolutely be done.
In order to stop overspending, you’ll need to retrain yourself and teach yourself some new habits. That takes time and dedication to the process. The kindest thing you can do for yourself is to expect challenges along the way. Sometimes you’ll feel the urge to get that instant hit that comes from using a card instead of cash. Don’t beat yourself up about it.
It takes patience to reform bad habits. But once your vision, goals and Spending Plan are in place, over time you’ll become a canny consumer who knows exactly how to stop spending money. Then you’ll get to watch your savings grow. Faced with a purchasing decision, the best questions to ask yourself are “Do I really need this?” and “Does this fit within my budget?”, then only buy something if you can answer “Yes” to both questions.
I was really surprised at how effective this system was. I followed the system and was surprised how much I changed my views on spending. My spending now aligns with my values and goals and not my emotions. Before I would feel anxious, tired, dissatisfied etc and would “feel” like I deserved a distraction or reward to make me feel good. But that only lasted a short while. My spending now aligns with my values and goals and not my emotions. I don’t feel guilty about spending because I am not spending on useless or frivilous things and if I do decide to buy something I have to be prepared for the dip in my savings – and for the most part I don’t like that so I decide against it. I am so happy that I have control of my money instead of the other way around and finally I feel like I am driving my money where I want it to go and seeing my goals achieved. It has taken all the angst out of budgeting – I actually like my budget because it is now a tool that helps me achieve my goals and not a burden and an activity that makes me feel guilty and awful. In a year and a half I have achieved all that and I am not ever going back 🙂