Part of reaching any financial goal is recognizing when you're off track - and then finding better habits that can help you stay focused and spend money with intention.
Spending money isn't necessarily a bad thing, but it can take a toll on your budget if you're doing too much of it.
Finding ways to save money instead may be just what you need to get back to reaching your financial goals.
If you want to get in the habit of saving more money and cutting down on the amount of money you spend, read on for inspiration and seven tips that can help.
How to Reach Financial Goals
If you're looking for ways to curb your expenses, it may be because you realize you're not reaching an important financial goal, like one of these:
- Building an emergency fund
- Getting out of debt
- Saving for retirement
- Buying a home
- Getting a college degree
- Taking a vacation
- Starting a business
But it's not hard to get back on track. Part of reaching any financial goal is staying focused on two things:
- How to build wealth
Building wealth is ultimately about keeping more of your money than you spend. It's a simple equation according to personal finance expert J.D. Roth of GetRichSlowly.org:
[WEALTH] = [WHAT YOU EARN] - [WHAT YOU SPEND]
- Why you're pursuing your financial goal
No matter what your goal is, being clear about why you want to achieve it can help spur you on to success. Clarity is the fuel you need to take action every day, like learning something new.
7 Ways to Rein in Overspending
Having a plan for managing your spending is important all year long. But when you think about what happens to your pocketbook during the holiday season, you may realize that now is a good time to figure out overspending.
Here are seven ways to start getting a handle on it today:
1. Get to know your spending triggers
It's easy to spend money without thinking about it; but if you want to save money instead, it can be helpful to also take a closer look at the "why" behind your spending habits.
Several factors can determine what you do or don't buy and whether you spend a lot of money or a little.
Some of the things that can act as spending triggers include:
- Your mood and mindset (i.e. feeling stressed or anxious and wanting to spend money to let off steam)
- Peer pressure from friends or family (FOMO, anyone?)
- Time of day and the weather
- Environmental factors that encourage impulse purchases, such as the checkout line at the grocery store
A good way to get to know your spending triggers is to keep a spending diary.
In this diary, you record each of your shopping trips, whether in-person or online, detailing what you bought, how much you spent, the time of day and your feelings both before and after making the purchase.
Keeping a spending diary can help you gain control over spending money and limit how often you give in to the urge to buy on impulse.
A spending diary can also help you get in the habit of tracking what you spend money on regularly and make it easier to keep a budget. A helpful way to track spending automatically is by using a budgeting app or logging in to online banking each day to see what you've spent.
2. Clear out your inbox
One of the simplest ways to reduce the amount of money you spend so you can save money is by eliminating the emails that hit your inbox.
For example, you may have signed up to receive emails about the latest promotions and deals from your favorite stores. But that just perpetuates the temptation to spend a lot of money on things you don't necessarily need, simply because they're on sale or the store is offering a digital coupon.
This can be especially dangerous leading up to Black Friday and the launch of the holiday season when retailers are trying to get shoppers' attention with special deals and offers. Unsubscribing from retailer emails is an easy and effective way to head off impulse purchases right away. Out of sight is out of mind.
You can go a step further and ask stores to remove you from their mailing lists if you regularly receive catalogs or coupons in the mail. If you'd rather not be bombarded with credit card offers, you can also opt out of receiving them so you're not tempted to open a new credit card account you don't really need.
3. Don't store credit card details online
A credit card can make purchasing things online easy, plus you could earn some valuable rewards on those purchases in the process.
While you might look at that as a way to save money, it could lead you into spending money you didn't intend to if you're charging things and not keeping track of the total.
This is a personal finance misstep that's easy to make if you're storing your credit card details online through a digital wallet app or at the checkout for your favorite stores. When you don't have to type in your card details, it's a lot easier to fill up your cart, click, and make a purchase without being intentional about what you're spending.
Taking your credit card (or debit card) details out of online checkouts and digital wallet apps means you have to slow down before making purchases online. When you have to pull your card out of your wallet and type in the numbers, that gives you time to think about the purchase and decide if it's really money you want to spend.
4. Consider going cash-only for a month
Credit cards are convenient - and earning miles, points or cash back on purchases is a nice perk. But it's possible that you could become too dependent on credit cards for spending money and end up with a mountain of debt. When your card has a high interest rate, carrying a balance can make purchases that much more expensive.
If you don't want to quit using your credit card altogether, consider taking a temporary break from using it for one month. During that month, commit to spending money with your debit card, checks or cash instead.
At the end of the money, review your purchases and budget to see how much you spent. Then, compare that to a typical month of spending with your credit card. (You can use a previous credit card statement for this part.)
If you spent less during the month when you weren't using your credit card, that could be an incentive to stick with the habit and go cash-only for the long term. And even if you didn't save a lot of money, you may at least learn that you don't necessarily need a credit card to make purchases.
Note: You don't want to close your credit card accounts entirely. Doing so could hurt your credit score. But if you want to remove the temptation to use them to spend money, you could remove them from your wallet temporarily and store them someplace safe.
5. Impose a 48-hour rule on new purchases
Have you ever made an impulse buy only to regret it later?
It's a difficult spot to be in, especially if you can't return the item and get your money back. But there is a way to avoid impulse purchases in the future and save money.
Imposing a 48-hour rule on new purchases can give you time to think a purchase over to decide if it's really something on which you want to spend your money. If you determine after the 48 hours is up that it's something you truly need, then go ahead and purchase it.
When imposing a 48-hour rule on new purchases, consider setting some guidelines. For example, you could set a dollar amount that would trigger the rule, such as $50 or $100. That way, you're not having to go through a waiting period for every purchase.
For larger purchases, you could wait even longer. If you want to buy something that's over $500, for example, you might wait a week or even a month. The more time you give yourself to think a purchase through, the more opportunity you have to decide if you really want to spend the money.
6. Try a longer spending fast
A spending fast, also called a spending diet, can help you accelerate your efforts to save money. The idea behind a spending fast is that you commit not to spend money, beyond basic living expenses, for a certain period of time.
You can do a no-spend challenge for a week, a month - even an entire year. During this time you would spend money on things like rent, utilities and basic food items at the grocery store. But you cut out unnecessary extras such as shopping, recreation, travel and takeout meals.
A spending fast can help you jumpstart your savings and give you perspective on where you've been spending money. It can also help you get in tune with what constitutes a "want" and a "need" in your budget. The money you don't spend is money you can use to pay down debt or add to your emergency savings fund.
Trying a spending diet can also help you avoid blowing your budgeting during the holiday season. A no-spend November, for example, can be a great way to minimize the temptation to overspend or make impulse purchases when retailers are rolling out the Black Friday and holiday sales.
7. Get friends and family on board
Your friends and family can be some of your biggest spending triggers if they encourage you to spend money unnecessarily. For example, getting invited out to socialize with friends may mean spending money on dinner, drinks or other entertainment for which you didn't budget.
If you are serious about not overspending, then let your friends and family know that you're making an effort to save money instead. Rather than going along with expensive outings, suggest alternative ways to spend time together that don't require you to spend a lot of money or any money at all.
Your friends and family may not change their spending patterns, but it's still important to let them know that you're changing yours. That can make saying no to things you'd rather not spend money on easier so you can grow your savings over the long term.