Spending money is like a drug to some people. Not everyone likes spending money equally, but it tends to give us some satisfaction. Because of this, we often tend to make bad decisions when it comes to spending our money and creating debt to spend more money. Spending money you don’t have is almost never a good idea. Making smart decisions when you spend is important to keep you out of trouble.
Smart spending decisions you should master:
- Don’t spend money you don’t have. If you don’t have a credit card, don’t get one. If you cannot afford a new car, don’t get one. It’s as simple as it sounds. We convince ourselves that we need things that we really actually don’t need. So, stop spending money that you don’t have.
- Buy what is needed not wanted. This is an area where we all tend to be guilty. Whether it is new shoes, a new video game, a new gadget, or snacks, we all do it. Don’t get us wrong; it is important to spend money on these things because they make us happy. However, there should be boundaries and control. Wants must only get attention when the needs have been covered. If you have food, paid your bills, and paid your rent then you can spend your allocated money on the wants.
- Buy smart. Stores often have specials of all kinds. This may require some careful planning, but it could save you money in the long run. If a store has a special on bulk buys or something that you tend to use a lot of, buy it. If you go outside the budget for that item or items, re-arrange your budget for the next month to absorb those expenses. Bulk buys save costs in future months so it should balance out. However, this requires planning and you should avoid spending recklessly.
Smart debt decisions:
- Don’t do it. The best decision is to not get yourself into debt. If you really cannot avoid taking out that loan or mortgage, then do so, but make sure you understand what you’re getting yourself into. Before you sign up for a credit card or a loan, read the terms and conditions. Ask questions and do research and know as much as you can find out. This way you will be prepared for taking on extra monthly payments. You will need to redo your budget to accommodate debt.
- Pay it off as fast as possible. If you have debt try to pay more than the minimum fee. This will help you get out of debt faster and will also likely reduce the amount that you need to pay back. If the payment period is shortened, you don’t pay as much interest.
Impulse spending and debt are like black holes. They suck us in. You should plan your finances so well that the black hole doesn’t become a problem for your financial situation. Read more on debt here. If you need some more tips on personal finance planning, read this article.