How to Develop Better Spending Habits

By leemartinc

You’ll find a lot of articles about how to save money and get out of debt, but what about how you spend your money? Being proactive when it comes to bettering your current financial situation is one of the best ways for you to learn how to manage your money and avoid getting into future debt by living outside of your financial means. 

According to the Debt.org, total U.S. consumer debt is at $13.86 trillion, which includes mortgages, credit cards, student, and auto loans. 

America is officially in a recession

It was officially announced that the U.S. is in a recession, and thanks to reports of a second-wave of Covid sweeping the nation, economic recovery could take years. This means employment is and will be for the foreseeable future, down. Companies are going out of business, production has slowed, hiring freezes are taking effect and jobs are being lost by the thousands. The ripple effect of Covid is being felt by nearly everyone, with no end in sight.

The money you have now may or may not be there in the future. That’s why learning smart spending habits is one key aspect to a secure financial future. 

What is smart spending? 

Smart spending is all about paying for what you can realistically afford. This means choosing to eat at home rather than eating out all of the time, or not buying items you know you don’t really need. Smart spending means creating a realistic monthly budget based on your current income, and then developing good spending habits to stay within that budget. 

We impulse buy because it makes us feel better

When times are tough, we often look for instant gratification to help us feel better. What better way to do this than by buying something that will lift our spirits. Often called “retail therapy,” shopping to make us feel happier isn’t necessarily a bad thing, as it can improve confidence in ourselves and might even solve a problem, like getting that tool you think we need or those shoes to go with that outfit you’ve been wanting to wear. Especially now, these kinds of purchases also offer a mental escape from reality, which can be much needed. But these impulse buys only help in the short-term. According to Psychology Today, “retail therapy” can lead to more problems if done in excess. Though getting into more debt is the obvious one, it can also cause you to start lying or hiding your purchases from your spouse or loved one, cause you to feel shame and guilt for spending money you know you shouldn’t be doing, and even depression because you know your digging a financial hole you know you may not be able to get out of. 

Bad spending habits are more than just impulse buys

Sure, impulse buys are part of the problem, but so is the lack of proper planning and organization. Look around your house, scour your bank account and talk with your spouse or partner to get a feel of the spending habits you’d like to break. Make a list. A few suggestions to look for are:

  • Needless online purchases 
  • Going over cell phone data
  • Buying items you forgot you already own

Instead of thinking in the short term, think about the long term 

The first thing you should think about when you spend unwisely is how it makes you feel. Be conscious of your thoughts when making purchases on items you know you don’t need. You may tell yourself you’ll feel better now, but think about how you’ll feel in the near future when you realize you’re short on money. Instead of thinking in short terms, think of the long term. You know you’ll most likely punish yourself a few days or weeks later because you fell victim to impulse. Train yourself to think about your financial future when you are tempted to make an impulse buy. No matter how bad you feel now, and how much you think buying that new shirt will make you feel better, you’ll feel a lot more confident, and even proud of yourself in the future knowing you resisted the temptation and saved that money for what’s really important, like bills or groceries. 

Recognize the bad spending habits you’d like to break

Once you’ve made a list of your bad spending habits, think about the cycle of how they occur. For example, do you spend time on your cell phone at night in bed browsing Amazon or other online shopping sites out of boredom? Maybe leave your cell phone in another room when it’s time for bed, set your alarm on an alarm clock, and read a book. On the same list you created before, replace the bad habits you want to break with new ones that will enable you to stick to your goal of spending more wisely. This won’t happen all at once. Give yourself time to get used to each new habit one at a time. It’s all about taking baby steps

Track your spending 

Creating a budget is time-consuming, especially when you have to track your spending. But there are ways to do this quickly and easily. If you’re serious about improving your spending habits, then this must be done. Part of creating a budget is setting goals. Everyone loves to reach their goals, right? It makes us feel better about ourselves and gives us the confidence to keep going. 

Find someone who will hold you accountable

It’s tough to change any habits on your own, whether you’re learning to exercise regularly or, in this case, developing better spending habits. It’s important to have someone hold you accountable when you deviate from your spending plan. It must be someone who had no problem calling you out. They shouldn’t shame you or make you feel bad about yourself. This person should simply be persistent and gently remind you of the choices you’re making and why. If you feel the need to indulge, call them and ask them to talk you through why you’re thinking about making this choice. They should also remind you to think in the long-term, and the importance of reaching your financial goals. 

Be patient

Rome wasn’t built in a day. And you shouldn’t expect your new and improved spending habits to magically happen in 24 hours either. Developing better spending habits takes time. Try not to be too hard on yourself when you fall back on an occasional impulse buy. Chalk it up to one bad choice and keep thinking about your financial goals. Remember, it’s all about the long-term. Something that may help is to allow yourself a small reward each time you reach a goal. This will help alleviate the occasional feeling of that need to spend, and it’ll give you that extra boost of confidence to keep working toward those better spending habits.