There is nothing inherently wrong with spending money because it is how you acquire some of the things you need in life. Your basic needs require you to spend money such as food, gas, electricity, and even in acquiring your own home. There are also times when you need to buy clothes and shoes for your everyday needs.
The problem starts to manifest itself when you begin spending your money more than what you can afford to spend. It might sound to be an illogical thing to do but people seem to do it all the time. The problem is that it is now made a lot easier because people just have to swipe and sign away for their purchases with their credit cards.
Spending money before you even earn it usually leads to debt because you could run into trouble repaying that debt. There are a lot of reasons why you might get into trouble as soon as you try and pay back your debt. One is that you might have not realized you are already racking up huge amounts of debt in a month’s time. You could also get into some financial emergency and be unable to pay back your debt.
As you start spending your money on things you need and want, you have to remember that you need to watch how you use your funds. You cannot spend blindly and purchase left and right with your credit card. You run the risk of using up too much credit where you put your future income in peril and you come up short with your payments.
Create a budget
Even before you start spending money, it is crucial that you create a comprehensive household budget. This is one of the most important financial tools you will need to start spending your finances wisely. It will serve as a guide and keep you accountable when you manage your finances. One thing you need to remember is that your budget needs to be as comprehensive as possible.
Your budget normally depends on two factors – your income and expenses you have on any given month. As you start putting your budget together, focus on your income first. This is a lot easier when you only have one source of income. However, when you have a lot of side hustles especially as the holidays approach, you need to make sure that you include everything.
You need to do the same thing with your expenses though it will be a lot more challenging compared with your income. The reason is that there will be a lot more components to it. You have recurring expenses such as the one for food and other basic needs. There are also big-ticket payments like the ones for your mortgage and even student loans. The idea is to consolidate everything and ensure that your income is more than enough to cover for your expenses.
Follow that budget
It is one thing to create a budget for your finances and another to try and follow it. Believe it or not, there are people who spend a lot of time in putting together a comprehensive budget only to let it sit on their computers. They could even be making a list and leaving that inside their drawers at home and they only look at it from time to time. USA Today shares that the average household uses up over 90% of their income.
Spending money is an everyday activity and as such, you need to always look at your budget to check if you are still on track. You do not have to bring out a copy of your budget every time you are about to pay for a purchase. You can check on it at the end of the day or week just to be sure that you are not spending more than what you can pay for.
However, there are times when you do need to carry a part of your budget like your grocery list. As you start putting items in your cart, you need to make sure that you are getting only the things you need. Even with your holiday spending – you need to make sure that you do not go over budget and end the year in debt.
Live a frugal lifestyle
If you are spending money and would like to stay out of debt, one way to go about it is to take on a frugal lifestyle. This is where you choose to spend below your budget and free up some funds to either pay down expenses or strengthen your savings. One thing you have to keep in mind when taking on this lifestyle is that it takes a while to get used to it.
To get started, you will also need that budget mentioned earlier because your goal is to make sure that you spend less than your limit. This is where your creativity and persistence will come in because you not only have to think of ways to save money, you have to keep at it over a long period of time until it becomes a habit.
If you want to lower down your food costs at home, you might want to start cooking more. This can be tiring when you have to keep doing it the end of a long day in the office. What you can do is to start meal preparations over the weekend so you only need to make minimal preparations every day. You can also buy the ingredients you need in bulk to help you save on cost and even with time you have to spend going back and forth the grocery.
Keep your eye on the prize
Spending money before you earn it usually happens when you are too caught up in the moment and you start paying for items you do not really need. One way to help you manage this is to try and remember what your goals are in life. As you keep your eye on your targets, it will help you step back and rethink your financial decisions.
The idea is that your budget and the decisions you make should always bring you closer to your goals. If you plan to pay off your mortgage loan in half the time, you need to make sure that you save money to make extra house payments. It is also possible that your goal is to retire early which should prompt you to keep increasing your retirement fund as the years go by.
Set aside funds for fun and recreation
One of the reasons why you might be making bad money decisions is that you could be feeling deprived of all the things you want in life. This is why it is important to always keep a spare fund for some fun and recreation. It can be for a movie night,k dinner for special occasions, or even a travel fund for you to see new places each year. This way, you do not feel deprived and you lower the chances of spending too much all at once.
If you make a mistake, correct it immediately
You will make mistakes in life but you need to make sure that you will be able to make the necessary corrections. Fox Business shared that about 36% makes mistakes because of a lack of financial education. If you make a mistake and buy something out of impulse, make sure you pay it back at the end of the month. The mistake can also be dipping into funds you are saving for the future. You need to make sure you replace the funds back to help keep your future secure.
Spending money will always be a big part of your life but you should always watch your spending because it can affect your future.