Your spending habits can make or break your financial position. It is not about how high or low your income is. It is how you choose to use the money that comes with every paycheck. That is how you can strengthen or weaken your personal finances. If you spend your money wisely, you are on the right track. But if you are irresponsible and impulsive with your spending, you are on your way to a financial crisis.
This is exactly why a lot of people are struggling with their financial situation. Let us be honest – it is easier to spend than save our money. You feel a special kind of high when you are spending your hard-earned money. It feels like a reward somehow. And the truth is, it is your reward. You deserve it. According to statistics, the average American spends a huge portion of their income on luxurious expenses. It does not matter if they live in a low or high-income household. They still tend to spend a lot of luxury items. While there is nothing with that, you need to look at it from a different perspective as well. While you deserve to spend your hard earned money as you see fit, you also have to think about your future self. Whatever you decide to do today will affect your future.
One of the ways that bad spending habits can destroy your future is through debt. If you keep on overspending, you will eventually land in debt. This is the debt that you need to pay in the future. It will be a burden that you will give to your future self.
Signs there is something wrong with how you spend money
Of course, there are times when we are actually unaware that we have bad spending habits. This is why you need to get to know the signs that say you should improve the way you spend your money. Here are some of them.
Dependence on credit cards
If you find yourself relying on credit cards to pay for the most basic necessities, you know that you are in trouble. That means you are running out of cash and you have to use debt in order to buy what you need. Apparently, this is something that a lot of Americans are probably going through. According to statistics, the current credit card debt is more than $1 trillion. Obviously, credit card users are so used to their credit cards that they have started to rely on it again. They probably forgot that it caused them a lot of problems during the Great Recession. While there is nothing wrong with using your credit card, if you do not have the cash to pay the full balance when the billing statement comes, then you need to reevaluate your spending habits.
Monthly late payments
Admittedly, there are times when you forget to pay your bills. However, if you are late on your payments because you do not have the funds to pay it off, that is a different issue. That may be a sign that there is something wrong with how you are spending your money. This is especially true if you know that your income can cover your usual monthly payments. But if you suddenly run out of money and you cannot keep up with your financial obligations, your money is being spent where it is not supposed to.
Stressed about money
If you start falling short every month, you will naturally feel stressed. Missing out on payments can cause you to feel anxious about money. If you feel your stress level rising because of money, you need to step back and look at your spending habits. Sometimes, you just have to reassess how you are using your money and identify where every dollar is going. This knowledge will give you a sense of control and ease your anxiety. Sometimes, stress is fueled by the unknown. But if you have a better grasp of where your money is being spent, you will have more power in correcting it.
Keeping secrets from your partner
You know there is something wrong when you start keeping things from your partner – even when it involves how you spend your money. When you are living with someone, you have to be honest about your spending habits – especially if it is starting to affect your household budget. If you are keeping things, that means you are doing something that you are not supposed to. This is financial infidelity and it can lead to problems in your relationship. According to statistics, 2 out of 5 adults have admitted to committing financial infidelity. If you value your relationship, this is one statistic that you do not want to have.
Emergency situations are magnified
You should also observe how emergency situations affect your life. If it feels like it is a complete disaster, then there must be something wrong with your finances. You are probably lacking an emergency fund – that is why one trip to the ER brings you to a state of panic that has nothing to do with your health. You see, if your spending behavior is good, you should have been responsible enough to save up for an emergency fund. That would keep you calm regardless of how much the unexpected event surprised you.
Finally, your spending habits need improvement if you find your debt continually growing. And you know that it has gone past the point of no return when your debt is already overwhelming your finances. If most of your income goes to debt payments, then you know that you need to step back and reassess how you spend your money. You are obviously overspending and that is what keeps your debt growing. You need to correct this before you lose everything.
If you are manifesting any of these signs, you need to check your spending habits. The more of these signs you have, the bigger the problem. You need to act on it fast if you want to keep it from ruining your financial future.
How to improve your spending habits
Fortunately, improving your spending habits can be simple. However, you need to be committed when it comes to changing your ways. Changing habits can be difficult if you approach it in a half-hearted manner. So if you are sure that you are committed to changing how you spend your money, here are three things that will help you develop the right spending practices.
A new budget
Start by creating a new budget plan. If you never had one before, then now is the perfect time to start using it. And even if you had been using a budget before, it is time to change it. The fact that you are practicing the wrong spending habits mean you are following the wrong budget. It might have been unrealistic or something. Make sure that your budget is in line with your earnings and spending. Not only that, it should also take into consideration your current priorities or any life milestones that you have gained.
Plan your regular spending errands
Most of the time, financial management is all about having full control of your finances. That means you need to plan how you will spend your money. Try not to be impulsive especially if you have a tight budget. If you have to go shopping or buy items in the grocery, you should make a list of what you need to buy. You should also set a budget and try not to go beyond it.
Adopt a frugal lifestyle
Finally, you can improve your spending habits if you adopt a frugal lifestyle. Some people think that frugal spending is too strict and will take the happiness out of your life. That is not entirely true. Frugality is about knowing your priorities and choosing to spend only on what is important. It is being in full control of your financial situation that you know what expenses should be prioritized and what should be ignored.