To some, being in debt seems to be an achievement, much like a competition over who has the most shoes or creditors on their back. Have a credit card so you can rack up more debt! Having a price tag on your head is not a status symbol. Here are some tips to help you out.
1. Track your spending for a month
Spend what you would normally spend in a month, but this time write it all down in one place. Keep track of ATM Fees, service charges and the like. The most important thing to remember is that you’re not striving to judge your expenditures – you just want to record them for the next step.
2. Categorize your Spending / Know your habits
Separate your expenditures into categories like bills, miscellaneous, eating out, groceries, and anything else which occurs many times during the month. Look for patterns in your spending.
- Food – You love to eat out with friends, you love to try out the best experiences at the expensive restaurants. This is a result of not wanting to eat at home or wanting to have experiences with friends. Either way, you might be spending too much on food.
- Experience – This falls under a similar category as the food. You want to experience life and do it with friends. There are concerts, book signings, poetry readings, conventions and other single shot experiences with friends.
- Stuff – You like stuff, whether it is books, office supplies, paper, stamps, knick knacks, CDS, or garden gnomes. This stuff is used and loved, the books are read, but there’s just too much stuff overall.
- Habit Based – I drink coffee because I always have. I have always done X, so I will spend the money to maintain the habit that I have. Acknowledge it as a habit by categorizing it.
Look at the things on which you have spent money. Examine the categories. Do you like your books, experiences or food? It’s fine to like things and use them. Is there anything that you believe that you spend too much money on? Can you not resist the latest books by your fifteen favorite authors?
Once you have found where the chinks in your spending armor are, write them down in the form of statements like – I spend too much money on restaurants. I spend too much money going out with friends. I spend too much money on drinking. Whatever it is, write it down.
This activity will push you and urge you to be mindful of the times that you are spending money on activities. Money you spend now cannot be spent later.
There is a lot of spending which is done in the moment. You might see something attractive and want to purchase it. Friends or family might want to go out to dinner. You may find yourself at an office supply store and just happen to want to add to your thousand-strong pen collection. Before you purchase the next greatest thing, ask yourself whether you need it or want it. Is there a model of that product that you want more?
You see, most of our spending habits can be controlled with a few simple questions. If you truly want to save money, start paying attention to where you are spending.
Before touching your hard earned money, pay attention and notice the inclinations that you have. If you’re going out with friends a lot, see if you can cut it down. Go to less expensive places – after all, it’s not really about the food, it’s about the friends. The sheer act of taking note and recording things will naturally reduce your spending.