How to Stop Wasting Money

Do you want to be thrifty?

Excessive and frivolous spending is listed by Investopedia as the most common financial mistake. To curb this urge to spend unplanned purchases that are not part of your regular budget, you need to understand the why, what and when of frivolous spending.

Emma Kerr, in her article Inside the Psychology of Overspending and How to Stop, says that people need to deal with the psychological side of money as well as the economic and financial side of money.

Remember that every company tries to sell you something, whether is a block of chocolate or a holiday. They know the buttons to push to motivate you to spend on things that you either don’t need or can’t afford.

I personally think one good way to stop impulsive spending is to delay the expenditure for 24 hours, giving you time to evaluate your priorities. Another option is to ask yourself, “If I buy this, what other purchase will I forego? Which of the two purchases is more important?”

Did you know that there is a medical condition called Compulsive Shopping Disorder? The Priority Group can help you with a free addiction service. You can check to see if you are showing signs of compulsive shopping.

When it comes to debt, my favorite author is Dave Ramsay, the famous American radio personality. You can read by review for one of his many books, Smart Money, Smart Kids.

On the Australian front, I would recommend Ditch the Debt and Get Rich, by Effie Zahos.

Having reviewed many articles about frivolous spending, I would suggest that there are five ways to help control your frivolous spending.

Always make a shopping list and stick to the list as you wander the supermarket isles. As part of this process, you should plan your meals before the shopping trip, so you know exactly what is required. Check what is in your pantry and see if you can’t create some meals, using what is in the pantry.
Review all the monthly subscriptions you are paying for and see which of these you are no longer using.
Never buy things with your credit card, unless you know you can pay for it in full when the account arrives. If you can’t manage your credit card, then withdraw the weekly budget expenses from your account and pay cash for all purchases.
Make a clothing budget. Take all your clothes out of the wardrobe and arrange them in color and purpose. Often you simply forget what is in the wardrobe. Once you have made the assessment remove the clothes and shoes and handbags you never wear and then select the ones which will be the core of each season’s wardrobe. When you do make new purchase, try to work with out basic wardrobe, giving it a boost with a new splash of color.
Remember the 50/30/20 spending rule. That 50% (NEEDS) of your take home pay for essential expenses, 30% (WANTS) like dining out, holidays, and entertainment and 20% (SAVING) which includes building an emergency fund, paying down debt and saving for retirement. It is

Lastly, I would say that over the years I have known many people who enjoy a great lifestyle now and save for their future lifestyle, without undue financial stress. It is not how much they earn, but how well they prioritize their spending.

Glenis Phillips SF FIN – Designer of Financial Mappers and Advice Online