How to Control Spending
In order to reduce debt, the primary focus on controlling
spending has included:
- Avoid your favorite stores
Yet, with all this advise, why are many Americans still racking up
record debt levels? Because the focus has been on solving the symptoms rather than
the cause of the problem. Yes, there are many people who have had
success using the advice above, yet there are plenty of others who
have not. It is like making a New Year's Resolution to lose weight
by cutting calories (spending less money) or by exercising more (increasing
will succeed and others will note. So, if the advice above has
not worked for you, what should you do next?
Ninety percent of consumers'
thinking occurs in their unconscious minds per Gerald Zaltman, Professor
of Marketing at Harvard Business School. Isn't interesting that
marketing professors know this but consumers do not. As consumers,
we need to understand why we are spending by exploring our unconscious
thoughts in order to offset the influence
that marketing has on our buying decisions. A key to controlling
spending is making unconscious spending decisions into conscious decisions. One
of the ways to be more conscious is to become a reporter
and ask "who,
what, where, why and how".
- What - "What am I feeling when I make purchases?" Is
some of your spending done when you are sad, depressed or angry?
If so, are you buying in order to make yourself feel better?
- Why - "Why am I making the purchase?" Is
it a need or a want? A need is for survival; a
want is for enjoyment. Note,
food can be both a need and a want. Basic
foods staples are a need and every thing else (e.g., prepared foods,
steaks, seafood, etc.) are are a want.
- Who - "Who am I making the purchase for?" For
yourself, spouse, child, relative or friend? It may seem generous
to buy for others including our children. Thus, we feel we are
doing a good thing. Yet, spending is spending
and is just as dangerous no matter if it is for yourself or for others.
- How - "How am I making my purchases?" Are
you planning or buying on the spur of the moment? Are you considering
your budget when you making the purchases?
- Where - "Where am I making the purchases, especially
spur of the moment purchases?" If you
are splurging at a favorite store, then make sure you are more consciously
your purchases when you go back to that store.
The key is to understand what is driving your purchases. There
can be a million reasons, a few reasons could be to:
- Be the nice mother, father, grandmother - purchasing for others
- Stuff feelings of sadness, loneliness, upset, etc. (shopping can
be a substitute for food or for alcohol as a way to stop feeling our
- Be a victim to marketing (making lavish purchases without planning ahead)
- Avoid feeling of not having (being) enough
- Inability to distinguish between a need and a want
The list can go on and on. So take a few minutes to think about
why you are spending the way that you do. Once you do, you are
half way to solving the problem. Other ways to control spending
- Budgeting - There is nothing better than to
set up a budget for the year to plan your purchases. This is especially true if you are married because
gets you and your spouse on the same page with regards to your spending
and saving goals for the year. The key is to to monitor
it. Many people put the budget away and revert back to
- Planning - Set up your long-term goals and dreams
that can influence your buying decisions from what I want now to fill
a void, to
what I want long-term (e.g., a house, a comfortable retirement, a
college fund for my child, etc.).
- Using your Personal Power - Take responsibility
for your spending. If
you are saying you are not good with money, then you are giving away
the responsibility for your spending to others and end up
significantly in debt.
- Timing - Avoid going shopping when you are tired
or when you are feeling sad, angry, depressed, etc. Give
yourself time to feel your feelings instead of stuffing them with food,
alcohol or shopping.
- Waiting - When purchasing wants (items you do not
need), wait 24 to 72 hours
before purchasing. There is no secret why home shopping
networks want you to make a purchase in 15 minutes, because
if you thought about
it, you are more likely to not purchase the item. Time allows
you to figure out
why you want to make the purchase and if it fits into your long-term
- Managing Risks - Bankruptcies are being attributed
to medical expenses, lose of job, disability, etc. Many feel
that this spending is beyond their control. Yet,
being proactive and setting up an emergency fund or buying appropriate insurance
(e.g., medical insurance with good stop loss coverage) can save many
families from filing for bankruptcy later.