Risk Mitigation Strategies For Unnecessary Spending
There are many of us who take vows on every first of the month that they will save money and will not purchase unnecessarily. But, unfortunately this vow is broken as soon as monthly income is deposited into our account. Overspending is a serious problem which is faced by every other person. Unluckily there is no magic wand which can be waved to save money, however; there is a simple two word solution: “Stop Spending.”
The question arises “how to stop spending money on unnecessary purchases?” If you want to improve your financial habits, executing the following measures will help you to mitigate your over spending and keep your outgoings in check.
Create A Budget:
The easiest way to limit unwanted spending is to set up a budget and then stick to it. If you are not aware how much you are bringing in each month and how much you are splurging out, at the end of the month your financial situation will not be as healthy as it should be. Therefore, start creating a budget. First things first, take your laptop or a paper and pencil, then track out all of your income sources and add them up to know how much you are bringing in. After that, calculate all your fixed costs (rent, debt, bills, etc.) and variables (grocery, gas, lifestyle, and entertainment expenses, etc.) then adjust them in a more budget friendly manner.
If you are blowing out more than 30% on having fun and non-essentials, it is time to take charge and sacrifice some comforts, which will be worth it when you will see your bank account plush at the end of the month.
Identify Your Spending Triggers:
When you go the mall, you have a favorite store over there in which you like to wander around the aisles and look for best deals?
Or when you are upset or bored, you splurge your money on ice cream and snacks?
There are many circumstances in which our emotions or situation triggers us to spend impulsively. Understanding what your trigger is plays a vital role in reducing your overspending. If you take away or adjust those triggers, you will eliminate that temptation and opportunity that causes you to spend. Hence understand your spending triggers which make you weak and stay away from them at all costs or deal with it with plans that don’t need you to shell out a lot of money.
Switch To Cash:
The best thing you can do to mitigate your unnecessary spending is paying with cash and stop relying on your credit cards. It seems very easy to swipe a credit card for a purchase but it is very difficult to handle the costs which add up at the end of the month. But, with cash you are aware physically how much money is vanishing with each purchase and how much is left. The outcome will be you will force yourself to stick to your budget and once your cash runs out; you have to walk away from spending. It is a tested technique to keep you from spending on the things which you don’t really need.
Set Short Term Financial Goals:
You can definitely end up in a worse shape if you don’t stop overspending your budget. This can be fixed by setting a few short-term financial goals which are possible and manageable. These include:
- Cooking more at home and no more going out for lunch at workplace for a month.
- Don’t use credit cards for 2 weeks and stick to cash budgeting system.
- Don’t use your vehicle on daily basis for a month, instead use public transportation, or share it with your partner/co-worker/friend.
- Save at least 10% of your monthly income in a separate account.
These goals will give you a target to aim for; as a result you will be constantly driven towards saving and overcoming your excessive spending habits.
Find A Home For Every Rupee:
Mostly people who have over spending habits flush out half of their paycheck as soon as they get it and when the bills arrive they don’t have quite enough to pay for their rent, utility and maintenance bills, etc. The best possible way to control this habit of unnecessary spending and make good spending choices, is to give every single rupee a job so that they don’t sit idle and tempt you to make spontaneous purchases.
As soon as you get your monthly paycheck, assign jobs to your money by dividing them into categories. For example:
- Category # 1: pay for utility bills.
- Category # 2: go in savings account.
- Category # 3: pay for grocery.
- , etc.
Budget In “Me Money”
“Me money” as the name speaks for itself, is the money which you spend on your wants. It is important to put aside 10% of the money from your budget to spend it wherever you like. All of a sudden going on a strict budget may save you money until the right temptation lures you towards itself and you end up on shelling out all the money you saved. Therefore, giving yourself little treats on and off is something to look forward to.
You cannot completely overcome your bad spending habits overnight and it is ok to be like that. Once you start acknowledging your budget and your goals you are certainly on the right track towards becoming a savvy person who knows how to make smarter spending choices. Remember, being slow but stable will let you achieve your goal.