There are many reasons why we overspend. Some of it is emotional while is some cases, it’s can be as a result of life circumstances. Whatever the reason, if you are finding that by the end of the month, your current account is in overdraft, you are not alone. But such company does not make for good bedfellows and it’s time to get your finances back o track. So, if you are determined to rein in spending and put your money is a positive situation, the following are some ways to help you back to financial health
Understand Your Spending Triggers
We are emotional beings and when it comes to money, lots of people have emotional triggers that move them to spend, sometimes, more money than they actually have. If you know how to manage the triggers you can learn to control your spending so the next time you feel an urge to visit the local shopping mall or even a quick visit on line…armed with your debit or credit card, keep the following in mind:
If there are certain environments that tempt you to spend, like those that solicit an emotional appeal, including seasonal events, special events then you are more likely to spend impulsively. In such cases, write yourself a spending limit and write it down on a yellow stickie and post it on your computer screen or leave your debit / credit card at home and take only a few euro worth of spending money with you.
Feelings of the day
Some people exercise when they are feeling stressed and use the exercise to de-stress. Others can shop, retail therapy didn’t earn the title for no reason! If spending can get out of hand, it is important to recognise those triggers and find a cheaper alternative…such as exercise.
Ultimately, for your financial wellbeing, it is important you learn to de-stress without adding the added burden of financial stress.
While peer pressure can be significant your those from younger age groups, the old expression of “keeping up with the Joneses” is just the same thing for adults, it is peer pressure to keep up appearances. Which of course is a nonsense since those Joneses don’t care about your financial wellbeing.
The trick here is to set your spending and if the Joneses don’t like it, you need to find new friends. Chances are that much of the pressure began with the person in the mirror. In fact, your friends will probably thank you for starting a trend if it means that you get to meet them for the simple pleasures like sharing a coffee or even going for a healthy walk.
Hanging onto the good life
If life circumstances means that your financial situation is being challenged, you need to take a first step and pare back on spending. For some, this can bring change that they are unwilling to embrace but for others, it can mean the difference between affording those essential they need and going broke.
The easiest way to do this is by creating a budget [link] and then living within your current income limitations. That way, you’ll survive financially and live to thrive another day.
- Track Your Spending
The smallest amount of spending will really add up if its part of a regular spending habit. Coffee is the favourite example but coffee can be a low-cost essential to connecting with others. Some more destructive examples are gambling and smoking, neither of which are good for your financial or social well-being in excess. This is why tracking how much you spend, down to the last cent is essential if you are serious about getting and keeping your finances on track. Remember, gambling just €20 per day will cost you €7,300 per year. Think of all the hours you have to work and pay taxes and charges on before you receive that much money. But cutting the habit in half, you could save a whopping €3,650 per year.
- Make money visible again!
Using a debit card is very convenient but it’s also a way of losing track of how you spend. So, if you have had difficulty budgeting, if you are spending more than you earn and you are always low on cash, you seriously need to consider returning to cash.
Yes, it’s way easier to produce that bit of plastic but without having a connection to your cash, it’s becoming easier and easier to spend your money, which is a problem for those that are short of it.
With real money, you have to make a conscious decision each time you consider the next purchase. Its acts as a moment of spending reflection and can slow down your purchases when they are most tempting.
- Set Short Term Financial Goals
Goal setting is a powerful way of managing money and staying motivated. Much as an athlete might prepare for the Olympic Games, staying motivated through those dark winter evenings and even injuries, financial planning is very much the same. Setting short-term, medium-tem and long-term goals will help you to put your money where your hopes are and give you the drive to cut spending when you know there is a big financial target to be achieved.
For example, a short-term goal might be to save €1,000 towards a holiday. If your goal is to save this amount over 6 months, this means you’ll need to save about €5.50 per day. There are lots of ways you can achieve this and it’s possible you’ll come up with your own creative ways to reach the goal…especially if a great holiday is the big win!
- Learn How to Budget Money
Not having a personal budget or money plan is a primary reason lots of people struggle to stop spending money. A budget comprises two parts; income and the amount of money spent on a weekly, monthly or yearly basis. But current accounts don’t lie and when they are empty, they are really empty.
So, review your paystubs, current accounts, receipts (you must ask for those each time you spend as well as your debit and credit card statements). Those will all provide you with a wealth of knowledge of how much you earn and how much you spend. You can use a simple budgeting sheet to guide you through the various income and spending information, which will also prompt you on what you remember to include.
A good move if you have never done this before is to track your money for 3-months, you’ll get a very good snapshot of where your money is going.
- Put your money to work
To best manage your money, try consider all of the financial goals you would like to achieve. If you are determined to achieve them, look to your income as the starting point to achieving them. How much do you take home? How much do you spend? Could you give every Euro a better job? Could you make it earn money for you, reduce your taxes, provide family protection or a lifestyle in retirement? These are all of the other great options that your income can achieve for you. But first, you need to create financial visibility and then, through smart spending, financial capacity to have a little more to put aside for the things that matter.