Without having any serious discipline or well-organised financial strategy it is super easy to waste money by buying unnecessary things. Many people often talk about how much regret they have after going a long period of time without any strict financial plan in place.
By not having the discipline to save money it has made it harder for them to achieve some of their most important financial related milestones such as; buying a house or being able to reward themselves with an overseas holiday.
Here are some important things to be mindful of if you are struggling with your current financial situation and some major signs that you have a spending problem.
Shopping Relaxes You
The term “retail therapy” is a concept describing how many people find comfort in shopping. If you are one of these people it would be wise to take a moment to ask yourself why. What are you finding comfort from? Is it a stressful job, your children at home, or financial concerns? Identifying what sends you straight to your favourite store is the first step in getting a handle on your finances.
Let’s hypothetically say you're worried about losing your job. Instead of wait for it to happen, plan ways you can come out ahead. Dust off your resume and join a networking group. Use this time to start a small business from your home. In other words, focus your attention on making your life better. It's possible that addressing the issue at the heart of your stress will get you out of the habit of retail therapy.
You Max Out Your Credit Cards
If you max out your cards or don't know how much you owe on them, it's likely because you are overspending.
The scary thing about credit cards is how much more we're willing to spend when we don't pull cash out to pay. A study discovered that people are likely to spend less time considering a purchase when paying by credit card, and are willing to pay much more for something than if they were paying cash.
Another study found that consumers will spend 83% more on credit cards than they will spend in cash.
Paying by credit card does not feel like a loss, particularly compared to what it feels like to pay by cash. Researchers refer to the phenomenon as "friction-free spending." They have even found that looking at a credit card image is enough to inspire people to spend.
Let's say you have $10 in your pocket, and buying a coffee will cost $7. That drink will take a big bite of your available funds. However, charging the coffee on a credit card with a $5,000 limit makes it feel as though you're spending far less of your available cash.
Adopt a cash-only policy any time you go out. Take only the amount you can afford to spend and stick to that limit. Leave your cards at home so you're not tempted to use them, and focus on pay off existing credit card debts to end the cycle.
You Pay Your Bill Late or Not at All
If you don’t have enough money to pay your bills each month it is most likely because you have a spending problem. On top of the damage that late and missed payments inflict on your credit score, there's the added stress of wondering how you're going to catch up.
To solve this problem, it is highly advised that you pay bills first each month, before spending anything on discretionary expenses.
It also a good idea to set up auto-pay for all your bills, including your mortgage or rent, auto payment, credit cards, day-care, and utilities.
Furthermore, only once all your bills are covered will you know how much money you have left over to spend on things such as; entertainment, dining out, and new clothes.