Your spending habits can make or break your financial success.

The inflow and outflow of cash is as important to your household as it is to any business on the street.

Your goal should be to maximize inflows and minimize outflows to create a surplus.

That surplus should than be converted into investable assets for your future.

Bing, Bang, Boom.

Let’s hold up for a second.

It is my assumption that you at least UNDERSTAND the basic financial concepts of budgeting, saving, and monitoring your money.

But this doesn’t necessarily mean that you’re in control of your spending.

Without having any surplus, there is nothing to save or monitor…so you see, controlling your spending habits is BIG DEAL!

I want to help you understand why you might be constantly breaking the piggy bank open.

Because, in my experience once I can identify the reason I am doing something wrong, I have been able to “auto correct” and fix the behavior.

So, let’s dig in.

 

 1. Failing to think about the future

It can be difficult to adequately predict future expenses, but thinking about the future is a key component of financial responsibility. If you have a tendency to focus on the “here and now” without taking the future into account, then you might find that this leads you to overspend.

Maybe you feel that you’re acting responsibly simply because you’ve started an emergency savings account.

You might feel that it will help you cover future expenses, but in reality it may create a false sense of security that leads you to spend more than you can afford at a given moment in time.

Remember that the purpose of your emergency savings account is to be a safety net in times of financial crisis. If you’re constantly tapping it for unnecessary purchases, you aren’t using it correctly.

Change this behavior by keeping the big picture in perspective. Create room in your budget that allows you to spend discretionary money and use your emergency savings only for true emergencies. By having a carefully thought-out plan in place, you’ll be less likely to overspend without realizing it.

2. Rewarding yourself

Are you a savvy shopper who rarely splurges, or do you spend too frequently because you want to reward yourself? If you fall in the latter category, your sense of willpower may be to blame.

People who see willpower as a limited resource often trick themselves into thinking that they deserve a reward when they are able to demonstrate a degree of willpower. As a result, they may develop the unhealthy habit of overspending on random, unnecessary purchases in order to fulfill the desire for a reward.

This doesn’t mean that you’re never allowed to reward yourself–you just might need to think of other ways that won’t lead to spending too much money. Develop healthier habits by rewarding yourself in ways that don’t cost money, such as spending time outdoors, reading, or meditating. Both your body and your wallet will thank you.

If you do decide to splurge on a reward from time to time, do yourself a favor and plan your purchase. Figure out how much it will cost ahead of time so you can save accordingly instead of tapping your savings. Make sure that your reward, whether it’s small or big, has a purpose and is meaningful to you.

Try scaling back.

For example, instead of dining out every weekend, limit this expense to once or twice a month. Chances are that you’ll enjoy going out more than you did before, and you’ll feel good about the money you save from dining out less frequently.

3. Mixing mood with money

Your emotional state can be an integral part of your ability to make sensible financial decisions. When you’re unhappy, you might not be thinking clearly, and saving is probably not your first priority. Boredom or stress also makes it easy to overspend because shopping serves as a fast and easy distraction from your feelings. This narrow focus on short-term happiness might be a reason why you’re spending more than normal.

Waiting to spend when you’re happy and thinking more positively could help shift your focus back to your long-term financial goals. Avoid temptations and stay clear of stores if you feel that you’ll spend needlessly after having an emotionally challenging day. Staying on track financially (and emotionally) will benefit you in the long run.

4. Not minding the gap.

When your income rises do you tend to spend more?  It is in your best interest to always live below your means and keep a large gap between your income and expenses.  You should feel wealthier when you have more money in your bank account and retirement plans rather than when you buy more stuff.  Don’t be fooled, the person with the bigger house and nicer car than you, simply made a CHOICE to spend more than you.  They are not wealthier.

Self Aware

Are you guilty of any of the 4 reasons listed above?  If the answer is YES that’s ok, if you are willing to make a change.  You must stop making excuses and take control of your spending habits.  Your financial future is counting on you!

 

As always, you can consult with me to discuss   your current financial situation.

Look for future posts on the best ways to build a portfolio  and check out my recent post on my personal financial life. 

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Thanks for stopping by and I hope you achieve financial success!