Changes To Your Spending Habits Is Key To Getting Out Of Debt
Friday, June 27th, 2008 Subscribe To Our Feed
It is unlikely that you will fall into substantial debts overnight. In all probability it is a slow drip process where you gradually build up debts on your credits cards or miss one or two mortgage repayments. And, seemly before you know it, there is a huge pile of debt dragging you down. The key to avoiding this scenario is by managing your spending habits before things get out of control in the first place.
Examine your spending habits in an objective fashion. In this respect most people lean towards one of two categories. They are either a spender or a saver. There are distinct characteristics for both types of people that you may be able to recognize in your own actions.
Spenders love to buy things. They go with their first impressions. Impulse buying is their specialty. Not allowing time to think about a purchase before making it leaves them with stuff that they could have done without. Spenders live for today with little thought to the future. Why save when you can be happy now?
Savers are on the opposite end of the spectrum. They think about the future all the time. In fact, they give more thought to the future than they do to the present. They sacrifice to the point of piety. Enjoyment of life is not in their equation. The sad part is that they may not even enjoy themselves when they reach the point in life that they have been saving for. A penny saved is a penny earned.
The aim of most people is to try to get a balance between these two polar opposites. You should consider the future and make some plans for it. But you should become obsessive about it. Ultimately, money and money matters are a means to living a happy life, not an end in themselves.
Start with last month’s purchases. Look at bank statements, credit card statements, and ATM receipts. The ATM machine is usually the fastest way to overspend. The convenience of an ATM machine is very tempting. Many people use the ATM without getting a receipt making it hard to track where your money is going.
A budget is a great way to keep an eye on your money. Set some budget goals and do your best to stick to them. Constantly refine the budget as you get more in tune with your spending habits. Don’t cut yourself to the bone, thus making a budget hard to follow. On the other hand, don’t give yourself so much leeway that you go over budget every month.
Do you need that new outfit? Check the closet. There may be a clothing item or two that fits just fine and still looks good. Visiting the mall just to “window shop” is too much of a temptation for the spender. Instead of walking out empty-handed, they’ll pick up a few things that were on sale.
If ATM’s or debit cards are a too much of a temptation then carry cash. Make one withdrawal a week for groceries, gas, and other incidentals. When the money is gone, that’s it. Writing checks for bills encourages you to track them in a ledger or electronically. Using cash may seem antiquated in today’s society, but it is still the best way to keep track of your spending. Receipts can be kept until the end of the month and then reconciled.
The key to getting out of debt or never getting into it in the first place, is to know where the money comes from and goes out. For most people the going out bit is the problem. By knowing exactly where your money is going you can rein in your (bad) spending habits. Ideally you want to spend a little and save a lot each month. Avoid impulse shopping. Wait a month or so and see if you still want the item you were keen on. You may find that during this time you have managed to save a fair amount of the money needed to buy the item in the interim anyhow.
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