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Are There Any Ways You Can Change Your Spending Habits?
We all have those times when we find ourselves overspending; however, if you are finding that you are constantly spending too much and it is really starting to impact your finances, you may be considering changing your spending habits. Not sure where to start? Here are five ways that anyone can pursue to change their spending habits:
Follow a Budget that Focuses on Spending Less
A budget involves taking a look at your income and expenses to then figure out a plan for your money. With almost every budget, you will have to take a detailed look at your spending habits in order to get started. That in itself may help you get started on thinking about your spending habits. Once you implement whatever budget you decide to go for, then those chances of changing your spending habits may go even further.
There are many budgets out there that you can use; some focus more on spending habits than others; the zero-based budget is one example.
With zero-based budgeting, you assign every dollar of your income to a specific purpose. This means that your income minus your expenses and savings should equal zero. By accounting for every dollar, you become more intentional with your spending and avoid frivolous expenses.
Set Up Financial Goals
Setting up financial goals may also be a great way to help motivate you to change your spending habits. These goals may be short or long-term, depending on what will be realistic or what may motivate you better!
Why can financial goals help with spending habits? Well, with a financial goal in mind, you may have better focus, have a larger perspective, have some form of accountability if you overspend (which can prevent doing it again), and also create a way for yourself to track your progress!
Have you never set up a financial goal for yourself? Here are some short-term goals that almost any may be able to achieve:
- Creating a personalized savings goal — Sometimes, the idea of a savings fund may be intimidating because we may think of it as something that has to be huge. However, savings goals can be personalized to whatever your income and lifestyle realistically allow, and this can be a great start!
- Pay off a single loan or credit card — Another goal that can help your overall financial standing is to pay off a loan or a credit card. Picking a single one, whether a personal loan, student loan or car title loan, to start with can make things realistic and can help motivate you to spend less.
- Save for a single item or experience — If you thrive off reward, then you can reward yourself for better spending habits by setting a financial goal as a purchase or experience. Although this may seem counterintuitive, all that time you spend changing your spending habits to get to this goal will likely be helpful to prevent overspending in the future.
Figure Out What Your Spending Triggers Are
Many of us may find ourselves spending money in certain situations, emotional states, or through certain influences more often than others—these can be referred to as spending triggers. However, until we take the time to figure out what those circumstances are, it can be tough to fix bad spending habits.
A strategy to help break these poor spending habits is to be aware of the circumstances related to your spending habits. Here are some common spending triggers that many people can relate to:
- Emotional spending: Some people spend money when they are going through an emotionally difficult time in their lives. This is commonly referred to as retail therapy. Or sometimes it’s the opposite- people will spend a lot during a great time in their life.
- Impulse items: Retailers actually use psychology with impulse items by strategically placing them on your way to checkout (both in-person and online). And so simply being mindful of this can help you get to checkout without overspending.
- Peer Pressure: Social situations and peer influence can lead to spending on social activities, dining out, or buying items to fit in with a particular group or lifestyle.
These are just a few and barely scratch the surface of the variety of spending triggers there are; take a good look at your spending and all the factors around it to identify yours. From here, you can start changing things.
Try the 30-Day Rule
The 30-day rule is simple and can be especially helpful for impulse spenders. With this rule, if you see an item you want to purchase, instead of buying it right away, you will have to wait 30 days before you purchase it.
Chances are that if that potential purchase was unnecessary, then you probably would have forgotten about it and saved that money for something else. If you do wait for those 30 days and go back, then that item may be a useful purchase.
Now think about how much your spending habits would change if you thought about this with every potential purchase (minus the essentials, of course).
Allocate Funds Into an Account That Is Out of Reach
Allocating funds into an account that is out of reach or not easily accessible is a smart strategy to prevent impulsive spending and promote disciplined saving.
This approach helps create a barrier between your spending impulses and your savings, making it more challenging to access the funds for everyday expenses. Of course, you don’t want to do this with all of your savings in case an emergency happens. However, this strategy can work with any discretionary income.
Here are some examples of these types of savings accounts:
- High yield savings account
- CDs or term deposits
- Retirement accounts
Changing your spending habits can be hard, especially if you have had bad habits for a long time. However, with several strategies at play, you can definitely start to make progress and gain momentum to help you spend less! It is important to remember to be patient with yourself and stay motivated despite setbacks, which will likely happen. Once you do learn to spend less, you can really enjoy having extra money for whatever goals you have!