One way to avoid lifestyle inflation, and entrenching yourself in debt, is to know how to stop spending money you don’t have. That makes sense, right? So many people get caught up in various life stages, adamant about their next purchase. Or they think they’ll be able to make up for the cost “later.” Let me tell you, the best strategy is not to spend the money in the first place.
What follows are some strategies to stop spending money unnecessarily on things you don’t need and to keep track of what you ARE spending on to eliminate waste.
How to Stop Spending Money You Don’t Have
1 – Make a Budget
Knowing how much you must spend each month is probably the first thing you should figure out. Know what you bring in each month and subtract all fixed expenses (rent/mortgage, utilities, debt, etc.)
What you have left over should be carefully allotted so that you 1. make the most of your hard-earned dollars, 2. know your limitations.
How to Stick To Your Budgets
One way to incorporate this into your daily life and spending is to make shopping lists for what you need/want and stick to them. For instance, while grocery shopping, use your list strictly and don’t buy anything not already there. Having a list will make it far less likely that you’ll buy what you don’t need.
Another strategy is to create envelopes with the exact amount of money you have to spend on your purchases.
2 – Save Before You Spend
This goes hand-in-hand with making a budget. If you spend before saving, flip the switch and start saving first. Then see how much you have left over to spend.
What do I mean by “save first”? I mean to put money into investments, retirement accounts, and emergency funds. These may seem like boring endeavors, but this is your money that you’re keeping. If not today, your future self will use it, may need it, and will thank you for getting your finances in order.
Another way to think about this: pay yourself first.
3 – Reduce Your credit cards
Eliminate extra cards until you’re down to two or three. Initially, this may lower your credit score; however, you’re doing yourself a favor in the long run. Fewer cards mean fewer sources of money to spend, more limits, and hopefully, it’ll be easier to track where your money is going.
Have a goal to pay off your cards each month – don’t carry a balance. This will stop you from overcharging and potentially save you a ton in interest payments.
Stop Using Credit Cards
An extreme version of reducing credit card usage: don’t use them at all. This is another way to help you spend less money. If you don’t have the freedom of credit cards, then it becomes much more difficult to overspend. Once you break your bad spending habits and develop some good ones, you can ease back into the credit card world.
4 – Prioritize Spending
Make a list of the things that matter to you most. To get the most out of your money, you need to be spending wisely. This means doing what is best for you and not for the sake of looking good to your neighbors.
If you know what’s important to you and your family, you’re more likely to focus on it, save for it, and you’ll stop spending money you don’t have on things you don’t care about.
5 – Compare Prices
If there’s any part of your life where you should be comparing…it’s in the cost of the items you buy, especially the big-ticket or fancier purchases.
Shop around before you buy anything and compare prices. This takes some time, but it can be so worth it! Looking for good deals can go a long way towards saving you money, can help you stop spending money unnecessarily, and give every dollar you spend that much more value. Remember that whatever you’re looking to purchase, upgrading your lifestyle doesn’t have to be expensive.
6 – Avoid Debt
I feel like this should be everyone’s number one goal in life. While there are good kinds of debt that help you grow your net worth or make you money, most of it is bad. Don’t take on new debt or accumulate more loans for purchases.
A prime example of this is credit card debt. As I said above, pay off your bills in full each month. It’s not worth carrying a balance and accumulating all that interest.
7 – Go on a Spending Hiatus
One way to kick a habit is to quit cold turkey. This can be applied to spending as well. Go on a spending fast. Set a time limit, for instance, a month, and promise yourself that you won’t buy something new or spend money unless you absolutely need to.
Some examples of day-to-day things you need and are allowed to spend include gas, groceries, and paying the bills. Beyond that, you are not to use cash or your credit cards. This means no eating out, no going out for drinks, no shopping for clothes or new shoes, and no going to the movies or renting movies.
This may seem extreme, and like with any problem, the first few days are tough. As time goes on, however, it becomes easier to follow your frugal living rules. You’ll also realize what you miss the most, what you can live without, which purchases make your life easier, and those that don’t add any value. (Plus, you’ll be forced to be creative in spending your time by looking for free things to do – think of the possibilities!)
Your Spending Mindset
Getting rid of bad money habits and developing good money habits requires developing a certain money mindset. Many factors can influence how you think about and treat money, and I think a lot of that comes from how you’re raised. However, certain universal practices can help you save money, reduce spending, and improve your ability to invest and stay out of debt.
If you struggle with excess spending or can’t seem to save, it’s time to re-evaluate your mindset and how you think about money. It’s also important to recognize what motivates you in your spending. If you’re trying to keep up with the Jones’ or spending is an emotional high for you, then you have to think about where that comes from.
All this isn’t to say that you can’t spend for fun or allow yourself little luxuries. You definitely can. It’s just important to remember that there are things you need to do first before you splurge or treat yourself.
The road to success is not easy, but it is definitely worth it.
Everyone’s relationship with money is different, and each person also has different priorities in life regarding what they prefer to spend their money on. There’s no right or wrong way to treat yourself; there’s no right or wrong answer to having fun. However, there is such a thing as overspending. The idea of this post is to know how much you’re willing to spend because there is usually a more affordable alternative (on the same note, to save for something that you can’t immediately afford).
Also, I don’t think a higher price necessarily means higher quality. As a bargain hunter myself, I look for the quality of the items and experiences I purchase as well as the price. Each person sees value differently, so again this will differ. I want to encourage everyone to figure that out about themselves – figure out what matters to you, where you find value, and know your limits.
Dealing with finances may be boring, and saving first before spending may not be glamorous, but you should take on the challenge, embrace the suck, so to speak, and figure out a way to shift your mindset. These actions can make a huge difference in your quality of life from a debt burden and financial freedom standpoint.