Most of us have been at that stage where shopping is your go-to form of stress relief. Where new shoes or new gadgets or new bags bring you temporary satisfaction and happiness. Where your savings account balance has been stagnant for years, as any increase in income would equate to increase in spending, instead of increase in savings.
And then, suddenly, it dawns on you that you will be a parent soon, but you do not have enough savings to start a family. How will you withdraw from being a shopaholic and break your bad habits?
Change isn't easy, that is for sure. Here are some of the tips that worked for me (which might work for you, too) to improve your spending habits.
Make use of budgeting apps or that stylish new notepad you bought. List down your monthly income and expenses. Elizabeth Warren’s 50-30-20 rule is a good place to start. It just means that 50% of your income goes to the essentials like housing and bills, 30% for your wants like eating out in your favourite restaurant and 20% should be allocated for your savings. Yes, S-A-V-I-N-G-S! Swap the 30 and 20 for even more savings if you’re up to it.
Try to logically reason with yourself (yes, it isn’t easy sometimes). When the craving to buy a new bag or new gadget kicks in, ask yourself why you need it. Your mindset should be “think of functionality”. Why would you buy an iPhone X, if your iPhone 7 is still working fine and you are just using it to call and browse the internet? Once you learn to think this way, chances are you won’t be buying new stuff so flippantly. Time to use all those leather bags that you have accumulated over the years!
Improve financial tracking and minimise credit card usage. Understand that there is a psychological explanation for why it is more difficult to control spending when using credit cards. Use cash or debit cards where you can easily monitor how your spending is reducing your total bank account balance. Nothing will motivate you to save more than to see a detailed report of where you expenses are actually flowing. Finding out that you spend $200 a month on coffee is a hard, but necessary, truth to swallow.
Congratulations! When you are already thinking about investment, you are on your way towards financial savviness. After all your sacrifices of going shopping only to leave empty-handed, it’s time to think of how you will invest all those savings. If you are renting, it’s time to think of buying your dream home so that your monthly rent can be converted to equity (another form of savings). When looking for a home loan, consider the ease of doing extra repayments so you can put some of your savings into the loan and pay it off faster. Think of any worthwhile investments that will help you grow your savings.
Those are my top tips on how I overcame frivolous spending on luxury items and avoided incurring debts. It takes significant willpower, determination and a little time to improve saving habits and break the cycle of spending. At the end of the day, it is always best to save money where possible so that you can spend it on the things that really matter. Like time away with the family and a quality home to live life in. After all, lasting and genuine relationships are the ones which will give you real happiness, right?