It is easy to bury your head in the sand when it comes to your finances.
No matter how much you make, most people at some point will be limited by a budget constraint. But how conscious are you of what you actually spend your money on?
Once your basic needs have been covered, such as food and shelter, etc., most of us seek to find a higher fulfillment in the form of comfort that money can buy.
With this desire to have more, you can often find yourself stretching your budget or, even worse, ignoring your budget to meet that comfort level. Unfortunately, the more you ignore your budget, hide from it, and avoid it, the worse your personal finances will be.
Are you aware of how much you spend?
Some experts believe that unconscious spending accounts for up to 30 percent of an individual’s discretionary income. That means if you got conscious of your spending, that money could be saved and working for you in investment to build your future.
Here are seven ways to help you stop hiding from your financial situation and become conscious of your spending habits.
Before you write a new budget, grit your teeth and find a new self-control level, you need to have a good hard look at your relationship with money.
Attitudes and beliefs around money generally come from your upbringing and childhood. Often there was a lack of respect for money or love for it. Or maybe there just wasn’t ever enough of it.
A good place to start when trying to become aware of your spending habits is to question how money makes you feel and identify the emotions surrounding the ‘money’ topic.
For many people, money brings up negative emotions such as shame, guilt, and envy. Our bodies want to reject negative emotions, and the fastest way to do that is avoidance.
Suppose you find yourself avoiding talking about money. In that case, there is a high chance you have a bad relationship and need to work on improving it. Your relationship with money will have a significant impact on your overall life satisfaction.
2. Life Planning
What is success to you may not be a success to another. What makes you happy in life may not be the same as the next guy. Finding out what you truly want out of life may help you become conscious of your spending to obtain your goals.
You may have heard the term life planning; it is an approach created by George Kinder that merges financial insights with a person’s desired lifestyle.
Life planning proposes that before you can find financial satisfaction, you must consider both human behaviors and money factors to create a financial plan that is motivating enough to stick to. The concept suggests you ask yourself the following questions.
- If you were guaranteed financial security now and in the future with your needs being met. How would you live your life?
- If you found out you had 10 years to live and didn’t know the day you would die, how would you live your life?
- If you only had 24 hours left to live, how do you feel? Are there disappointments in your achievements of any form? What dreams do you wish you had fulfilled?
Identifying what you want out of life will make it easier to identify where to spend money on things that really matter.
3. Create New Spending Habits
Getting face to face with your personal finances is uncomfortable. But it is necessary.
If you want to wake up one day with financial freedom, peace of mind, and some kids in college, then getting conscious about your spending habits now is your only option. There is no easy, fun way to sit down and write a budget.
There are, however, many great online budgeting tools to help speed things up. Creating habits takes time.
An old myth says it only takes 21 days to form a habit; unfortunately, studies have found that it takes a lot longer. 66 days to be exact. Write the budget and then stick to it for 2 months. By then, it will become a habit.
4. Simplify Debt
Sometimes facing the reality of a budget can shine a light on all your outgoing expenses. You realize how many small outgoings there are for unexpected items such as personal loans, car loans, student loans, etc. Small debts and outgoing payments can get complicated. If not managed well, missed payments can cause havoc to your credit report.
Many great online loan options allow you to consolidate all your small personal debt into one loan. The benefits of consolidation loans are that they simplify your payment structure. Instead of multiple small payments to manage, they would be rolled into one.
When looking for a consolidation loan, you will want to find one that has a much lower APR than your current loans. A low APR will allow you to pay off more principal debt and lesson fees, and interest. Compare personal loans at Financer.com
5. Purchase with Cash
Electronic transactions have made spending so simple that it is easy to let purchases slip by using your debit or credit card unnoticed. To become more conscious of the money you are spending, consider going to an ATM, drawing out the cash, and buying the product.
The conscious effort to hand over cash and allowing your eyes to see the money exchanged for the item cements the purchase in your mind. If you are not up for old school cash transactions, then try a budgeting app.
6. Fun Money
Adulting is hard and being diligent with your money can feel monotonous.
In your monthly budget, set some money aside that you can blow on whatever you want. Buy coffee, lunch, an outfit, anything you want without any guilt or justification. But once that money is spent for the month, that is it, back on track.
Its purpose is to have a little bit set aside for fun that you don’t have to be answerable for. How much you set aside will depend on your financial goals. The idea is if you assign all your other money to responsible and somewhat ‘boring things,’ then that can feel kind of tedious.
So, to prohibit yourself from having a crazy blow out and overspending with an ‘ugh who cares, this is too hard anyway’ mentality, prepare for it.
Having some fun money already available and accounted for will help you become conscious of what you truly value as fun and give you some instant gratification along your saving journey.
7. Hide Your Credit Card
Little purchases add up quickly and eat into potential savings for your future. By leaving your cards at home, you won’t be tempted to grab something on a whim.
That quick coffee to get your day started or that spare of the moment lunch with a work colleague when you have already packed and planned your lunch can cost you hundreds over the month.
By keeping your cards at home, you cannot be tempted by impulse buying. If you are worried, you will get stuck and need to know you have access to money, then carry $20 in your wallet for emergencies or leave your cards in your car.
The goal is to make it hard for yourself to waste money on items that don’t serve the purpose of building your life how you truly want it.
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