Are you spending your money wisely?

Do you want to know how to manage money more effectively and stop struggling with money?

Everyone have money troubles. Some of us, want to earn more, while the rest of us, need to spend less.

In fact, the main reason for the lack of money is due to overspending on things that we don’t need, or won’t need in the future.

Overspending is the most common cause of financial difficulties!

According to Time Magazine, nearly 73% of Americans die with massive amount of debt in their name.

That’s a lot of people who are in debt!

In this article, I will shows you the best way to spend money wisely and get the most bang for your buck!

Let’s dive into the topic on ‘Spending Money’ and take a look at some tips to spend money now!

Editor’s Recommendation: Learn to become Debt-free in 5 steps.

tips on how to spend money wisely

1. Create a Budget

Learning how to create a personal budget is the most important life skill if you want to manage your personal finance efficiently.

You can track your monthly spending and income with a notebook or a simple budgeting app.

How to budget expenses.

  1. Organize: List your purchases by category such as: food, clothing, entertainment, bills. etc.
  2. Categories: Those categories with the highest monthly spending amount are great targets for saving money.
  3. Breakdown: Instead of just a monthly budget, you may want to drill down to a weekly budget for each category.
  4. Allocate: Lastly, allocate a set budget for each of your categories. Your total budget have to be smaller than your income. This will allow you to save a portion of your income for savings and investing.

By tracking your expenses, you can get an accurate picture of your current financial health.

  • You will understand where do you spend your money.
  • Learn how to stop overspending by understand where you spend most your money.
  • Learn which area to cut spending so you can save to invest the money at somewhere which can earn you a passive income.
  • Lastly, things which you may need to spend more money on to improve your productivity at work.

Generally, I will track my expenses by writing all my expenses in my trusty notebook at the end of each day (Personal finance app is a great choice as well!).

This process takes me not more than 5 minutes to track my daily expenses.

At the end of each month, I will review my bills and add those expenses to my budget.

By comparing my income and my expenses, I will get an rough idea of my financial health and I will know if I am over spending my income.

2. Plan Your Purchase

Planning is the key to success. Spending money wisely is not an exception.

Being wise with your money is not just about being frugal.

If you want to be smart with your money, you have to plan for your purchase.

Buying something because you just feel like it, is often a bad financial decision. Making a purchase without proper planning can balloon your spending and hurt your financial health.

Here are some tips for planning your purchase:

  • Do research online. Before you go down for your ‘shopping expedition’, check online on the items which you intent to purchase; look at the price they are selling and read the review of the item before making a commitment to purchase it online or at retail.
  • Write down what you need to buy before you go for your shopping trip. This will not only save you money, but it will save you time as well.
  • Do window shopping only when you want to buy something. Enjoy the shopping experience by not spending money. Take note of the prices of several stores. Only after you are sure you want the item, then you may want to commit to the purchase.
  • Stay focus. Focus, focus, focus! There are a lot of things you want but only a few that you need. More focused you are on what you want in the store, the less you will spend.
  • Beware of Freebies. Research have shown, taking and accepting free samples may convince you to make a decision to buy the product. A decision that you may regret later. Why free samples works? It is because of the Principle of Reciprocity.

3. Avoid impluse Purchase

Impulse purchases is not a good idea if you want to be financially wise with your money.

When planning your purchases is a good idea, buying something on an impulse is definitely a terrible one.

Here’s my story where I learn this lesson the hard way.

On a random day, I was browsing in a shopping center. Then, I saw this amazing wedding photography package. It looks nice, it looks fancy, it looks amazing.

And guess what I’ve done next?

Yup, I paid on the spot and brought the wedding photography package. Because, if I buy it then, I’ll get all sorts of freebies.

After I told my girlfriend (now wife) of the purchase, she reprimanded me for weeks for buying the package without her consent (Girls take wedding photo very seriously!).

My friends reprimanded me as well, they show me no pity either.

I’ve spend a few thousand dollars and got a bad scolding. Ouch!

Be warned, avoid impulse purchase!

Here are some tips to avoid impulse purchase:

  • Do window shopping with care. You may end up buying something. Often if your self-control is low, you will likely end up spending on stuff you that may not be most suitable for you.
  • Don’t make purchasing decisions when your judgment is impaired. Guys and girls, remember; alcohol, drugs, or even lack of sleep can reduce your ability to make sensible decisions.

4. Make Your Own Buying Decision

Always make your own buying decision. Don’t get influence easily by others. Decide by yourself if you really need to buy something. If you think it is due to peer pressure. Don’t buy it.

Why?

Do you remember the time that your friend says that dress is beautiful, and 10 minutes later, both of you bought something from that store?

Your children, friends, or even a colleague whose tastes you respect can influence you to spend extra money.

Everyday kids have ‘convince’ thousands of parents to spend money on things that ends up in the garage sale a few weeks later.

Here are some simple tips to help you make your own decision during shopping:

  • Do not take advice from store employees too seriously. Remember they are here to sell you something. Think independently. If you need a question answered, politely listen to their response but make purchasing decisions on your own.
  • Know what you need and want. Most salesperson sell you their service or product based on what help them earn the most. They can be an insurance agent, a used car salesman, or a simple sales person on the street, it doesn’t matter. Decide on your own if the product they are selling is something you will need. Also take their advice with a pinch of a salt, and seek advice from someone you trust.

5. Pay In Full

Pay in full will help prevent you from overspending your budget.

How do you know if you can afford something?

You ask yourself these few simple questions

  • Is this a need or a want?
  • Will you still be able to save after the purchase?
  • Will this purchase exceed my weekly budget?
  • Are you borrowing to purchase?
  • Is there other things you can better spend these money on?

The rule of spending is simple.

If this purchase will cause stress to you financially?

Don’t buy it.

Of course, there are exception to this rule, such as housing and cars. But that will be on another topic, where we will talk about good debt and bad debt.

Why is it better to settle or pay in full?

Settle or pay in full is always a better option if you want to be in control of your personal finance. Partial payment options such as, Credit cards and 0% installment plans for consumers items are some of the many reasons that people overspend.

These payment options increase your appetite to spend because due to 2 reasons:

  1. As it is a digital transaction. You don’t physically see that you are giving your money to the salesperson when you purchase the item.
  2. Credit cards and 0% installment plans allows you to spend money which you don’t have right now. In other word, you are spend money which you may or may not have in the future

With a wave of the credit card and no physical cash changes in hand makes buying stuff easy.

The ease of payment makes you ‘feels’ as if you haven’t spend anything, though you might have spend everything.

Here are some tips to help you in cutting your spending:

  • Don’t run a bar tab, or use an installment for consumers items because the delay in payment will confuse you on how much you are actually spending.
  • Pay in cash so that every transaction feels real and not just some digital numbers
  • Bring just enough cash with you, not too much, or more than what you think you need.
  • Set a budget for your weekly budget withdrawal from an ATM rather than making an withdrawal whenever you run out of money.

Editor’s Recommendation: Build you own emergency fund?

6. Sales and discounts

Sale! Sale! Sale! Everyone loves sales!

Similar to how I love to invest during a stock market crash. The rare opportunity where all stock are on Sale!

You should buy your everyday items during a sale as well!

If you know you will need an item in the future but not today. It may be a great idea to buy the item when it is on sale.

Here are some ways you can purchase an item cheaply:

  • Use a coupon, almost most shops nowadays have some sort of coupon available for the consumers to use. Even fast food chains like MacDonald and KFC have coupons online if you search for them.
  • Buy the product you will need in the future during the end of season sale. Store owners will usually put their winter coat selections on sale during summer when no one is buying. But during winter, the coat may cost twice as much. A dollar saved is a dollar you may want to invest in the future.

Editor’s Recommendation: Passive Income vs Active Income

7. Reward Yourself

Research have shown, small rewards such as giving yourself occasional, inexpensive treats can actually helps you to focus on your goals better.

Heard of the term ‘Cheat Day’?

‘Cheat Day’ is probably the favorite day for most gym junkies.

On the “Cheat Day” these gym lovers can eat whatever they want for that one particular day of the week.

But it comes with a condition,

‘They have to complete what they should do for the rest of the week, aka exercise rigidly in the gym’.

Once they have fulfilled the condition, they can reward themselves on the ‘Cheat Day’ for a job well done.

‘Cheat Day’ is important because it can be very tough doing workouts and eating protein powder without a break.

At some point of time, you will basically give up and start eating everything you like. 

The concept of “Cheat Day” can be used for spending money and being frugal as well.

Controlling your spending is tough, if you suddenly stop spending on all your ‘wants’ without a break, it will be very hard to maintain for a long time.

Many saver’s wannabe eventually give-up and splurge much more than they should.

Balance is the key.

The goal is to give yourself a small reward once a while to keep your spirits up and prevent an uncontrolled splurge later.

How to reward yourself for being a smart spender:

  • Set aside a very limited amount of money in your budget for these treats. I will usually set a maximum of my 5% income on these treats.
  • Set aside these ‘spurge money’ on a separate bank account, which you will not feel guilty when you spend any of them.
  • Find cheaper alternatives to expensive desires. If you love going to SPA, probably you can consider to take a bubble bath at home instead. If you love to drink Starbucks coffee which cost $7 a cup, consider making your very own blend of coffee instead which may cost less than $1 a cup.

tips on spending less and saving more

  1. Set a Budget
  2. Plan Your Purchase
  3. Avoid Impulse Purchase
  4. Make Your Own Decision
  5. Pay Purchase In Full
  6. Buy at Sales and Discount
  7. Reward Yourself

Learning how to spend money is just as important as how to earn money.

Spending more than what you have will lead to very bad financial situations which you may want to avoid.

Millionaire increase their wealth by having good spending habits.

Spending wisely will allow you to save more money, so that you can invest and plan for your future.

Home budgeting and proper planning is the key to spending money wisely.

Remember the future of your personal finance is in your hands.

Here are some resources what will help in guiding you to your success.

What guides me in my journey are some of the many books I read for the past years. There also many words of wisdom said by those who have achieve what we want to achieve and to learn from them is the shortcut to our goals.

Taking your First Step is always hardest, But it is the Most Important Step to Greatness

Smarter Everyday Library

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Disclaimer: I am not your financial adviser or lawyer, information found in our website are just my opinions and should used for entertainment purpose only. You should always ask your financial adviser or lawyer for any financial or law related advice.

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