If money burns a hole in your pocket, you may have a spending problem. Many people seem to consistently spend more money than they make, leaving many families in a bleak financial situation that takes years to rectify. Instead of falling into a money pit, take some time now to reduce your spending by following these 5 tips.
1. Needs and wants
Learn the difference between needs and wants. Needs are items you can’t get by without, such as groceries, a place to live and a car to drive to work. Wants are items you would like to have, but don’t need for daily life. Wants include items like convenience foods you could easily make yourself, luxury accommodations that are outside your budget and a car if you live and work near public transportation. Once you’ve identified your needs versus your wants, take care of your needs before you think about your wants.
2. Time is money
Think of money in the same terms as you think of time. Time is limited and you have to carefully decide how to spend each moment in order to accomplish everything that needs to be done. Money is the same way. It’s limited and you need to plan carefully in order to have enough of it to pay for everything you need. You can’t borrow extra time in a day, and in the same manner you shouldn’t borrow extra money either.
3. Consider the cost of ownership
Every item you own costs you in space, maintenance and maybe fuel. If it’s an electronic item you need to store it, insure it and pay for the electricity to run it. Even a couch or a new pair of shoes will cost you something in terms of space. Every time you consider making a purchase, ask yourself what the non-monetary cost of the item is.
4. Consider whether you already have it
Disorganized people tend to spend money on the same items over and over because they can’t remember where they put the original. Instead of buying a baking sheet for the 15th time in a month, make an effort to get organized and find the sheets you already have. If you find yourself wondering if you already bought an item, odds are you probably did. Look for it and enjoy the savings.
5. Sleep on big purchases
If you’re making a large purchase of over $100, you should sleep on the decision. Stores like to use flash sales and display tactics like only putting 2 or 3 of an item on a floor to get impulse shoppers to make the commitment and purchase the item. Don’t fall for this trap – sleep on all major purchases to have a chance to see if you really need the item or just want it. You may be surprised to find how quickly your mind changes.
Take advantage of these 5 tips to reduce your spending habits for a more sustainable budget. These simple tips can help any over spender regain control and make healthier decisions.