“5 Mistakes in your Financial Spending Behavior That are Costing You Money (+ How to Fix Them)”
It is tempting to go on a shopping spree when you go to a supermarket after getting your paycheck, only to regret later when you have consumed your entire salary weeks before your next paycheck is due. It can be hard to break your spending mistakes, but to start building your retirement savings or achieve your big financial goals, you must save some money every month from your paycheck. Therefore, being disciplined with your spending behavior can help you achieve your financial goals.
But unfortunately, many people do not realize that making small adjustments in their spending habits can help them save precious money that they can use in case of an emergency or can invest to generate a return. If you track your every transaction throughout the month, you will be surprised that the seemingly smaller expenditures are costing you a lot of money when you review your spendings at the end of the month.
In this article, I will show you some common spending behaviors that are costing you money and how you can get rid of these habits.
1- Using credit cards to fund your purchases:
Using credit cards for shopping can quickly pile up your debt if you are not disciplined and calculated with your purchases. The credit card companies reward you for spending lavishly and often give you discounts at different shopping outlets, enticing you to spend more than what you can afford. When your credit card’s bill is due and you only deposit a part of your bill, the bank charges an exorbitant interest rate and bank charges on your outstanding balance, resulting in you going deeper in the debt cycle.
You should stick to using your debit card for all your necessary purchases. However, if using your credit card becomes unavoidable, be disciplined, spend within your limits, and clear your outstanding bills on time. Never leave your bills outstanding as the interest rates charged on credit cards are among the highest. Also, avoid using your credit card at the ATM to withdraw cash; the sky-high interest will immediately apply and will start accruing until you settle the amount. Using your credit card can give you reward points and discounts, but my advice is to use it only if you are sure that the purchase you are making with your credit is essential and that you will be able to pay your credit card bill on time. If your purchase meets these criteria, you can go ahead with the purchase using your credit card.
This will save you from going into the debt trap and you will be able to buy only those items that are necessary; you won’t be buying unnecessary products to get discounts or reward points, which you will have to pay for in the shape of high-interest charges, penalties, and bank charges.
2- Excessive Dining out:
While dining out occasionally — once or twice a month — should not hurt your budget, you should always aim to prepare your meals at home while limiting your dine-outs so that you don’t blow your limited budget. Dining out has become increasingly common, and many people, to avoid the drudgery of cooking themselves, either dine out or order their food online, which is way more expensive as compared to the home-cooked food.
By limiting your dine-out activities, you can save a lot of money. To get an idea of how much you can save by restricting your dine-outs, you should start keeping track of your spendings at the expensive restaurants and review them at the end of the month. Most likely, you will be astonished at the amount of money to spend per month on having meals at different restaurants. If you can save even half of the amount, that could come in handy for fulfilling your other essential needs.
To keep your rising costs under control, you should start with gradually reducing your dine-out activities and find alternate ways to cook at home or buying ready-to-eat and ready-to-cook meals, which can be comparatively cheaper.
3- Impulse Buying:
Marketers use all sorts of innovative and psychological tricks to persuade consumers to buy different products or services. When you enter a superstore or an online shop for that matter, you would see deals and sales signs flashing all over the store, assuring the shoppers that the products are available at throw-away prices, which entices the customers. However, if you are a novice shopper, you might fall into the trap and buy the product, only to find out that the same product was actually available at a much cheaper price somewhere else. Therefore, avoid buying anything on impulse, rather you should research the product and get quotes from different sellers before buying a high-priced product so that you don’t end up buying a poor-quality product at an expensive price.
A product purchased after research will not only save you some money but will allow you to buy a quality product as well. With your limited income, you should aim to save as much as possible so that you don’t have to suffer financial hardships after your retirement or in emergency situations. While some might think that the money saved will be paltry, but when you invest the saved money sensibly, it can grow to become an astounding sum of money, given the power of compounding.
4- Spending frivolously on new gadgets:
Every year, famous mobile phone brands release new versions of their flagship gadgets, and people rush to place their pre-orders and make overnight long queues in front of their shops to be among the first ones to get their hands on the new gadgets. With the limited income you have, indulging in the frenzy of getting a new version of the gadget when the previous version is working perfectly fine, is incomprehensible and is a perfect example of unnecessary purchasing and poor spending habits. Moreover, the newly released gadgets are priced extremely high that a person with limited financial means can ill afford it. Therefore, instead of wasting your money on the new phones and gadgets, you should continue with your current one, and instead save your money for some productive use — or an even better option is to invest it in a profit-bearing account.
5- Outsourcing instead of DIY:
If you are living on a tight budget and are finding ways to make your ends meet, you should review your spending habits and identify the areas where you can cut your expenses. Apart from the points we discussed above, you might want to cut on the expenses by doing some chores yourself instead of outsourcing them. For example, if you hire the services of a dry-cleaner for your laundry and dry-cleaning, it might be a good idea to do it yourself as this will save you considerable money. You can learn to fix different things in your house yourself instead of hiring services of an outsider whom you will have to pay large sums for effortless chores. You might find it a little difficult initially, but with little effort, you will be able to do the task yourself. Nowadays, if you want to learn anything new, you can consult the internet and how-to websites to do many tasks yourself, helping you save a lot of money. You can even source your services to others with your newly acquired skills, which can help you earn some money as well.
Conclusion:
The bad spending habits mentioned above are not exhaustive, and the best method to find and overcome these is to start tracking your everyday expenses by downloading an app. Many apps are available that let you categorize and analyze your expenditures and sources of income to make adjustments in your spending behaviors. Record your expenses in the app, and at the end of the month, review and analyze your expenditures, which will allow you to control your expenses in a better way.