Unless you are printing it in your basement, you probably have a limited amount of money to spend each month. Even when you have the best intentions, you can still find yourself getting into financial trouble if you have bad spending or money management habits. Learn more about these money habits and how you can turn things around.
An impulse purchase is an unplanned purchase of some product or service. Impulse purchases are all about emotion. Marketers and retailers know this, and that is why you will see those small items like candy and magazines at the checkout aisle. These marketers know that as you wait, you will shop and buy.
Impulse shoppers see a sale and don’t want to miss out. They may see an item that they want to have immediately. You jump to buy it before you think rationally about whether you need it or can afford it.
To curb impulse spending, first, recognize when you do the action. If you reach for that magazine or candy at the checkout or the clearance item, force yourself to wait. Before pulling the trigger on a purchase, consider if you have the extra money to spend on that item and if you need the product. It will give you time to think about your decision, and chances are you’ll realize you don’t need it after all.
If stopping impulse buying altogether doesn't sound realistic, consider adding it to your budget. Designate a set amount each week or month, and keep your impulse buying below that amount.
You may struggle to stay afloat financially—never mind getting ahead—if you don’t have a budget in place and know how to stick to it.
A budget allows you to see how much money you’re bringing in and where it’s all going. It enables you to make changes that help you save more money and avoid going into the red each month.
Budgeting doesn’t have to be a big chore. It can start with only carrying a small amount of cash with you each day. Use a system like envelope budgeting to put money aside for paying bills systematically.
Consider signing up with a program like Mint that automatically tracks your spending for you. All you have to do is check your dashboard each day to ensure you’re staying on track and making adjustments as needed.
Relying on Credit Cards
Unless you’re able to pay off the balance in full each month, using credit cards is one of the worst things that you can do for your finances, especially if you’re using them to live above your means.
If you don't pay the card in full each month, every dollar you put on a card will cost you many times more in interest charges. You could spend years of your life and thousands of dollars paying down purchases you don’t even remember making.
If you have credit card debt, considering using the debt snowball or debt avalanche method to pay it down. With the debt snowball, you pay more on the debt with the lowest balance each month while paying the minimum on the rest of your debt. Once that's paid off, you apply what you were paying on that card to the debt with the next lowest balance.
For example, if you were paying $100 per month on the card with the lowest balance and the $50 minimum payment on the next lowest balance, once the lowest balance was paid off, you'll start paying $150 on the next lowest (the $50 minimum plus the $100 from the previous card). You keep doing that until all your debt is paid off.
The debt avalanche is similar, but you pay off your debt starting with the highest interest rate debt.
Every once in a while, a convenience purchase can be a nice treat. It can also be a necessary exception if you’re in a great hurry. Convenience purchases are those that are routine and take little thought. But if you find yourself regularly making convenience purchases, the convenience will cost you.
For example, to stop getting fast food every day, you could learn to make a few basic meals in bulk that you can enjoy throughout the week. You could make a regular weekend event of preparing a dish that can be separated into freezer containers for future lunches. This preparation will even help on those evenings when you don't want to cook and order delivery meals instead.
Similarly, you could stop buying a pricey latte on the way into work every morning and get up 5 minutes earlier to brew a cup at home a few days per week. A little extra work on your part could wind up saving you significantly.