3 Ways to Change Your Spending Habits
Let’s face it, one of the biggest problems in America today is debt. Not only is the general public in debt, but our government is hugely in debt with no signs of slowing down. We are spending like there’s no tomorrow. If we keep going at this rate, we will crash. It’s a cycle we’ve been through before. We live the high life, then we hit a recession or depression, then go through recovery, and start the cycle all over again. The only way we can ever stop the cycle is to learn to change the way we spend money. Interested in finding out how? Following are 3 ways to change your spending habits.
Budget
I know, I know… almost everyone’s least favorite word. We don’t like to budget because we don’t know how, or because we don’t understand the purpose of a budget. Many people find a budget too restrictive and don’t want to be told how they can and can’t spend their money – not even by themselves! I mean, think about it; who is the one creating the budget? If you create one that you can live with and still accomplishes the goal of living within your means, then isn’t it alright for you to tell yourself how to spend your own money?
Instead, we overspend and then let our creditors, the light company, the water company and the government tells us how to spend our money – and struggle to make ends meet. I honestly don’t see how this is in any way, shape or form more enjoyable than creating a budget. Basically, if you don’t rule your money, the lack of money will rule you.
Having a budget is crucial to changing your spending habits. If you don’t have a plan for your money, you will keep spending it impulsively and never get ahead. No one ever said that creating a budget was fun. But, I can guarantee you that if you create a budget – and stick to it – your life will become far more fun than it is now. Money problems create stress. Spending without a plan creates money problems.
Save
I’m sure you’ve heard the saying “pay yourself first”. This is another critical component of changing your spending habits. You are probably wondering what saving money has to do with spending. Well, that all depends on if you are saving money the right way. When you save, you need to save in three categories.
The first thing you save for is emergencies. You know, that rainy day your grandma always talked about. If you are new to this concept and don’t really have any money saved aside, start by saving $1,000. Later, when you have your debts paid off you’ll increase your savings to equal 3 to 6 months of your monthly expenses.
The second thing you save for are short-term expenses. These are things like new furniture, a car, a trip… Basically, anything that doesn’t fall within your regular monthly budget will probably fall into this category. Even a down payment for a home would fall into the short-term savings fund.
The third thing you save for is retirement. If you haven’t started saving for retirement, what are you waiting for? If you are expecting Social Security to bail you out, your retirement is on pretty shaky ground, and you’d better hope your children make a lot of money and don’t mind taking care of you in your old age! Face it; the way the government is overspending, Social Security probably won’t be around when most of us retire.
The best time to start saving is now. If you have never seen tables showing the magic of compound interest, Google it and take a look. What you find will shock you and maybe depress you if you are 30 or older and have no retirement fund yet. Just don’t let that keep you from starting now by thinking it’s too late. It’s never too late. Start today!
Have Plastic Surgery
No, I’m not talking about a facelift or a nose job. Cut up your credit cards. Credit card debt in America is out of control. According to cardhub, credit card debt increased $8.1 billion in 2010. One of the best ways to permanently change your spending habits is to only buy what you can pay cash for. Whether that means using your debit card, paying by check, or carrying around cash envelopes for your spending categories, not using credit cards will have a huge impact on your financial future.
It may mean tightening the belt. It may mean waiting until payday for something you’d really like to have today. It may even mean missing out on a purchase altogether because you simply don’t have the cash on hand right now. But, in the long run, that delayed gratification will help you create a positive cash flow, will lower your financial stress, and will change your future for the better.
If you have your savings plan in place, you have no need for a credit card. Most retailers, hotels, car rental agencies, etc. will accept your debit card without hesitation. Credit cards do not help you. The only ones who benefit from credit cards are the banks who offer them to consumers. No matter how good your intentions at paying off the bill in full when it arrives, life happens. Credit card debt is too high a risk to gamble on.
By following these three simple steps, you will soon change your spending habits and probably wonder why you ever did things differently in the first place.
