How to resist the urge to splurge
Do you spend every single last dime of what you make – and then some? Don’t know? You’re not alone. In these days of easy credit, it’s all too easy to blur that line between your income and your expenses. This becomes a real problem when those bills start piling up, because you have no money left over for savings or investing – unless you somehow start spending less than you earn. Does that sound impossible? It’s not. Here are a few tips to help you resist the urge to splurge.
Where’s the flow?
First, try to get a handle on where your money is going. Determine how much income you have. If all else fails – look at your bank statements and pay slips. Write down what you find on the left-hand side of a sheet of paper. Draw a line down the middle of the sheet. On the right-hand side, write down how much debt you paid off over the past year (mortgages, car loans, and credit card debt are the most important items to nail down), all your essential expenses like groceries, utility bills and property taxes, insurance payments, and all your discretionary expenses like cable, internet, phone, entertainment, Starbucks stops, and so on. Add up everything on the right-hand side of the sheet. Congratulations, you’ve just created an income statement.
The sum total at the bottom of the right-hand side should be less than the single number on the left-hand side. If it’s bigger, you have a problem – your expenses exceed your income.
Once you have an idea of the big picture with your personal income statement, I’ve found that the usual problem isn’t the income – it’s the “outgo.”
4 tips to control spending
Fortunately, there are some easy day-to-day techniques you can use to get that spending back under control.
- Pay off the plastic!
With annual rates of between 20% and 30%, credit cards are the worst. So pay off that credit card debt as fast as possible. If you’re in deep, consider consolidating your debt with a low interest line of credit or a personal loan. And then cut up all your cards, save for one. And on that one, slash the allowable credit limit – and never max out the card!
- Resist the urge to splurge!
Retailers rely on impulse spending to ratchet up that $50 sale to $100 or more. You’re in a psychological war with the retailer. So plan to spend defensively: Decide how much you’re willing to spend before you ever set foot in the store. Set a dollar limit – even for those “impulse” buys – and don’t exceed it.
- Don’t give in to impulses!
Love those lattés through the day? That new fashion mag? A little sale item from a lunchtime trip to Winners? Those “incidental” expenses could add up to $10 a day or more. That’s over $3,000 a year you’re frittering away. Set aside a fixed amount of “pocket money” for incidentals each week, and don’t exceed it.
- Be a bargain hunter!
Unless you’re fabulously wealthy, and money is no object, don’t be afraid to look for bargains. And I don’t mean haggling for two hours to get five bucks off the price of a $30,000 car. That’s a “saving” of 0.016%, and it just doesn’t make sense. Instead, comparison shop like crazy for that new flat-screen TV. You’ll very likely save $200 off the price of a $1,000 TV when you shop online – a saving of 20%. When making big-ticket purchases, shop around, and don’t be afraid to haggle. Most retailers will now match competitors’ prices for identical items. Over a year, you could save thousands of dollars.
Where to get help
There are many more practical ways to bring some discipline to your spending habits, ways that won’t feel like you’re in a financial strait-jacket. If you think you’re beyond hope altogether, consult a fee-for-service financial advisor, who will demonstrate that no one’s finances are ever really beyond hope.
© 2015 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited.