I hear it all too often, clients having a hard time controlling their spending. I can’t blame them, consumerism is all around us and marketers know what they’re doing. They know our behaviors and how to psychologically target them. Do you ever just have a thought about something, and then suddenly you see an ad for it in your Instagram feed or on Facebook. HOW?!
Here’s the thing. With all of the temptations that surround us, it’s hard to balance our wants, needs and financial goals. But the key is balance. It’s okay to give into your wants, you work hard! But understand that it’s important to take care of our needs first and then reward ourselves within reason.
““Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”Will Rogers
1. Start with a spending plan
Your money needs to have a purpose, a job. If it doesn’t, this is what leaves us susceptible to overspending. Simply thinking about a goal isn’t going to help us accomplish it. We need to write it down, create a plan.
Knowing how much you have coming in every month and how you’re going to allocate it is going to set you up for success to help you spend less than you make every month. Download my budget worksheet here to help you get started.
Part of this spending plan may also be tracking your spending for the short-term. Set a time once a week to go through your spending and manually write it down, whether that’s in an excel spreadsheet or track it in a bullet journal.
2. Tracking your spending for the short-term
Yup, this is going to be tedious. But there is no better way than to face your spending habits head on. Numbers don’t lie; going through your transactions and totalling up your spending categories is going to shed light on how you’re spending your money. Trust me, even if you’ve been kicking this can down the road, understanding your spending is a good thing! If we identify how we’re spending our money, then we can make more informed decisions that bring us closer to our goals in life.
So set a time once a week to go through your bank account, write down and categorize your transactions. Whether that’s in a spreadsheet or a bullet journal, you do you. The nice thing about a spreadsheet is that you can automatically total figures and track your progress for your designated budgeting period (i.e. monthly). But if you’re like me, there are some fun bullet journal ideas for budgeting out on Pinterest that can help you accomplish the same task!
3. Consider having two checking accounts
If you have a hard time making sure you have enough set aside each month to cover your essential bills, then the strategy below is a game changer.
Consider opening a second checking account and dedicating your existing account to fixed/essential expenses and then the second checking account to variable/lifestyle spending. Then give yourself a set dollar amount for your variable spending every month. Once it’s gone, it’s gone. And there is no risk of dipping into your funds that are dedicated for your essential expenses.
4. Pay yourself first (and automate!)
If you want to save or invest, do it first before anything else. If you wait until the end of the month, or your budgeting period, the chances you’ll have anything left over to stash away are slim to none. If you budget on a monthly basis, that gives you 30ish days to find an excuse to do something else with it. Make your savings a priority and take care of it right away. Then you know you’ve taken an actionable step right off the bat to build wealth!
- Set up auto contributions to your retirement account
- Split your direct deposit for your paycheck so a portion goes directly in each account
- Set up smaller weekly transfers so savings or debt payments seem more manageable
5. Stop using credit
If you’re spending more than you make, then you’re going into debt. Which means you’re likely needing to use credit to supplement your lifestyle. Cut the cord. I’ve been there, we’ve all been there! Using credit makes it all too easy to give in to convenience and emotional spending.
Remind yourself, if you don’t have the cash (or money in your checking account) you can’t afford the purchase. We often trick ourselves into thinking we can afford something by justifying being able to pay off the credit card the next time payday rolls around. It’s not worth the cash back or the rewards points if you’re sabotaging your finances.
6. Set boundaries
Mindset. This is the key to living within your means. You have to want to spend less than you make. You have to want to save, invest, or pay down debt and know why. That doesn’t mean it’s always easy. So we set boundaries and reminders that help keep us in line.
There is no shame in treating yourself or buying purchases that are classified as wants rather than needs. Quite frankly, allowing yourself to give in to the needs every once in a while is going to help keep you from going out of control. But that doesn’t mean it’s always easy, so it helps to set some rules to help keep things within reason:
- Only make online purchases on Friday’s (*Also when you have something in your cart, leave and come back to it. Sometimes companies will send you a coupon to encourage you to finish your purchase)
- Better yet, tell yourself you can only spend money if you physically go to the store (no online purchases)
- Set a spending limit on your guilty pleasure. Give yourself a set dollar amount every month to do whatever you want with (for me, it’s clothes!). When it’s gone, that’s it. You either spend the full amount each month or roll it over for the next month. Take it out in cash or have a designated checking account.
If you have comments, questions or any thoughts to add I would love to hear from you. And hey, if you need some help getting things in order, I’m just a message or phone call away.
Carolyn Rowland is a CERTIFIED FINANCIAL PLANNER™ passionate about empowering individuals to take control of their financial landscape. “We often tend to place our own priorities on the back burner for others, resulting in sacrifices we don’t often realize we’re making.”Carolyn believes in taking a values-based approach to financial planning. “Together we’ll define what matters most to you, what you want your life to look like, and develop a plan that fits your lifestyle.”CC
Carolyn Rowland is in the Milwaukee WI, area.