Many of us start the month off with good intentions. We take a look at our paycheck and make a pact with ourselves to save a certain amount of money, and only spend on things we really need. However, by the end of the month, we have not only exhausted last month’s paycheck, but also our savings, and are probably even in debt.
Overspending has become common amongst Singaporeans. The reasons for overspending vary. Some overspend because they are unaware of their spending habits. Others overspend because they overestimate their income and underestimate their expenses and payments. Others have been known to overspend in an effort to fit into a lifestyle that their income cannot support.
It doesn’t matter what your reason for overspending is. The following tips will help you to better manage your finances and get them under control.
1. Understand What Makes You Spend
Many people spend money as a result of psychological and emotional triggers. Identifying these triggers will help you overcome the temptation to spend and minimize the opportunities to overspend. You may want to consider factors such as:
- The time of day that you usually spend more
- Environments that present temptations for you to spend e.g. shopping malls
- Pressure from peers e.g. wanting things that your friends have
- Your emotional state when you are most prone to impulse buying
- Your lifestyle choices that may cause you to overspend e.g. compensating for something you lacked while growing up, or desiring a level of comfort that you can’t afford.
2. Keep Track Of Your Spending
The little purchases you’re making add up. In fact, they could be the very reason why you are overspending. You won’t notice your bank account dwindling as you continue to make small purchases.
The best way to stop overspending is by keeping track of every penny you spend. Keep track even of those small daily purchases you make e.g. that stick of gum you love so much but costs much more than regular gum, or that latte in the morning on your way to work.
This will help you identify areas that you can cut costs. For example, if you forgo your daily $4 breakfast latte and sandwich, you can save about $100 per month.
3. Set Long And Short Term Financial Goals
Set long-term financial goals such as buying a 3 bedroom house within the next 10 years. This will help you live with the future in mind.
You should also set short-term financial goals, such as reducing your spending on eating out from $300 to $150 in the next month. This is an attainable goal, and is also something that will help you save money in the short-term. Accomplishing your short-term goals will keep you motivated.
4. Budget, Budget, Budget
Budgeting means having a plan on how you will use your money. This means defining the different things you will spend money on, and how much money you will spend. Be sure to allocate some money in your budget to savings. You should also include some money for entertainment and miscellaneous expenditure to ensure that budgeting doesn’t drain your life of joy.
It is not enough to have a budget; you also need to commit to stick to the budget. Don’t spend more than you have budgeted on for anything.
It is also important to remember that budgets are not cast in stone. If the budget was not adequate last month, you can make adjustments the next month. You can also make adjustments for changes in your life such as the loss of income, or making less money in the month.
5. Separate Your Cash
It’s hard to limit your spending when all your cash is in one place. It’s easy to use money that was meant to be used for something else this way. You can prevent this by separating your money. There are several ways of doing this. One of the most popular methods is by opening different accounts and depositing money for different needs into the different accounts.
Another popular method is the envelope method. In this method, you place money for different needs in different envelopes. When the money in the envelope has been spent, you can’t use money from another envelope to cater for that need. You’ll have to wait for your next paycheck.
6. Use Cash Only
It’s easy to overspend when you rely on debit or credit cards to make payments. They are convenient and therefore easy to use when you need to make a payment. However, you will also be less aware of how much you are really spending when you rely on these forms of payment. The payments are likely to add up significantly when you receive your monthly statement.
If you use cash, you’ll know exactly how much you’re spending at all times. It is also much harder to hand over hard cash than it is to hand over your credit card. Using cash only will help you face your spending habits, and therefore curb them.
7. Only Carry The Amount Of Money You Need When Shopping
Using credit cards gives you access to even more money than you actually need. The same happens when you carry more money than you actually need.
Avoid using a credit card and ensure that you carry the exact amount of money you need for the purchases you have set out to make. Extra points if you destroy credit cards for which you know the numbers by heart. You can request a new card if you truly need to have a credit card.
8. Make New Friends
If your friends are causing you to spend money on unnecessary things, then making new friends could help you curb the overspending habit. Make friends who are conscious of how they spend money. Their saving habits could rub off on you.
9. Find New And Inexpensive Way To Pass Time
Find hobbies that are free or inexpensive to indulge in. These should not expose you to situations that will tempt you to spend money. For example, if you overspend when walking around in the mall, take a walk on a nearby trail instead.
Just because overspending has become a habit, it doesn’t have to be the story of your life.
You can make a change now. Start by applying the tips above.