When I was younger, I used to have some pretty bad spending habits. I would purchase things that really didn’t add any value to my life such as DVDs, CDs, and action figures. I would eat out whenever I wanted, and see every new blockbuster movie the first weekend they came out. I could have easily kept this up forever, but fortunately, I eventually figured out that my money could be used for better things.
Figuring out how to break my bad spending habits was pretty tough. It wasn’t realistic to just stop all my spending overnight, I had to make small adjustments over time before I really felt comfortable with my spending. The turning point was probably when I realized that I need to prioritize saving over spending. It sounds like such a simple concept, but once you combine that with the following tips, you’ll find that breaking your bad spending habits won’t be so bad.
Track your spending
If you want to know how to break bad spending habits, you need to know what your money is being spent on first. What I recommend is tracking your spending for a month or two – you literally want to write down or log everything you spend money on. Now that you have this info, break everything down into categories e.g. bills, entertainment, groceries, eating out. It shouldn’t be too hard to recognize where you’re spending too much and where you should make adjustments.
Create a budget
Since you’ll know where all your money is going, you can come up with a budget. List out all your spending categories, but this time, add savings categories such as retirement savings, a home down payment, investments etc. Your fixed expenses come first, but your saving goals should come a close second. The money you have left over should be spent on whatever you want. Remember, budgets are never set in stone. Feel free to adjust yours as needed, but always try to prioritize your savings.
Figure out your weakness
This can be a bit tricky since it’s not always obvious. Some people spend when they’re bored, some do it when they’re depressed, while others may do it out of habit. You want to try and figure what your spending weakness or trigger is and then find a way to avoid it. If you find that you buy more things whenever you go to the mall, then go to the mall less. If your buying snacks every day at work, pack snacks instead.
Use cash only
One of the reasons we have bad spending habits is because we all have such easy access to credit. By using our credit cards, we can have anything we want right away by simply charging it. If you let this get out of hand, you can quickly find yourself in massive debt. To avoid this, switch to a cash only budget. By using cash only, you’ll only spend what you physically have. Plus, as you see your cash reserve dwindle, you’ll naturally start to spend less.
Set a savings goal
This is the point that really set me on the right path. I knew I was going to propose to my girlfriend eventually so I started saving for an engagement ring. Of course, after the engagement, I would have to save for the wedding and an eventual home purchase. These things cost a lot of mone,y so every time I was about to spend money, I asked myself, can this money be better used elsewhere? Most of the time the answer was yes.
Breaking your bad spending habits will take time so don’t get discouraged if you don’t get it right away. When you do figure it out, don’t be afraid to spend a little on yourself now and then. It makes no sense to put all your effort into just saving, you still need to have fun.