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How to Control Spending

In order to reduce debt, the primary focus on controlling spending has included:

  • Cut up credit cards
  • Avoid your favorite stores
  • Pay yourself first
  • Track your spending

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 income).  Some 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 aware of 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:

  • Keep up with the Jones
  • 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 negative feelings)
  • 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 include:

  • 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 a budget 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 unconscious spending.
  • 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 plans.
  • 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.
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