Everyone knows that habits are hard to break. You get stuck in a repetitive cycle, and if you lose your motivation for a second, you can fall back into the vicious pattern. But, breaking a habit isn’t impossible. When you find healthy solutions, you can disrupt this pattern and change your life for the better. In this article, we discuss ways you break your bad spending habits for good.
What Makes a Bad Spending Habit?
Sometimes it’s clear when a habit isn’t good for you, and you need to stop. Chewing your fingernails is a bad habit. Forgetting to floss is a bad habit. Smoking cigarettes is definitely a bad — and highly addictive — habit. But, when it comes to spending, it’s a little harder to determine what is a good habit and what is bad. Depending on the context, going on a shopping spree could be a rewarding experience, or it could be a big financial mistake.
You’re Damaging Your Finances
Instead of looking at what you spend your money on, you should be looking at the results of those purchases. Are there consequences to your spending? Do you notice that you don’t have much money left for essentials like groceries or gas after going on shopping sprees? When your spending habits put your financial stability at risk, you need to make some changes and make them fast. You could be digging yourself into serious debt.
Here are some more signs that your habit is impacting your personal finances:
- You are living from paycheque to paycheque
- You have maxed out your credit card
- You are missing important bill payments
- You are regularly paying late fees and penalties
- You are borrowing money from trusted friends/family members
- You are always wondering why you are broke
You’re Spending for the Wrong Reasons
You also have to ask yourself why you’re spending your money. There are times when your main motivation for shopping is a necessity. You need groceries in your fridge, toiletries in your medicine cabinet, and gas in your car.
In other cases, your motivation for shopping will be a pleasure. It’s perfectly fine to get small indulgences like pricy espresso drinks or movie tickets once in a while. But when you make these purchases regularly, you can quickly run into financial trouble. Try to think of it as dessert. It’s okay to have a cookie or two when you’re craving something sweet. Eating an entire pack of cookies, on the other hand, is not the wisest decision. And it will definitely make you feel sick.
A good way to avoid overindulging is to practice mindful spending. Mindful spending means that you focus on your needs more than your wants. You aspire toward long-term satisfaction over immediate joy. While shopping for clothes online or getting the newest tech on sale will give you a rush of excitement, you should be putting that money towards your utility bills or your debt repayment. In the end, you will be much happier having paid off your debt than you will be with a new pair of pants.
Joy isn’t the only emotion that can drive you to overspend. Sometimes people browse online stores or go to the mall whenever they are bored. Sometimes they use shopping as a coping mechanism every time they are upset or stressed out. And sometimes, people can’t stop themselves from spending. It’s a compulsion.
Compulsive shopping is an addictive behavior. Someone struggling with compulsive buying disorder will find it extremely difficult to resist their urges to purchase items. They will likely have excessive amounts of credit card debt because of their shopping sprees. Their personal finances will be at serious risk because of this fixation.
These are some common signs that you suffer from a compulsive shopping addiction:
- Hiding your purchases or lying about the amount that you spent.
- Spending beyond your budget.
- Feeling a loss of control during a shopping spree.
- Feeling strong guilt after finishing a shopping spree.
- Having lots of new items that have gone untouched. Items still have stickers or price tags on them.
- Losing track of how much you spent and what items you bought.
- Having relationship issues because of your spending.
Compulsive shopping should not be treated as a bad spending habit. People dealing with this addiction need to seek out professional help and long-term support. A support group like Debtors Anonymous could be a good start to getting to a better state of mind. A compulsive shopper can’t solve their problem with budgeting tips and small lifestyle changes, much like an alcoholic can’t recover by learning a non-alcoholic cocktail recipe. This is a serious mental health issue.
How do you fix bad spending habits?
So, you see the evidence that there is a problem. There is a lot of debt sitting on your credit cards. You have taken out loans or borrowed money to support yourself and make important payments. You may even get calls from bill collectors once in a while.
While you can see the results of the problem, you’re not entirely sure what is causing it. For that to happen, you need to start tracking your spending. It’s easy to track your spending when you use online banking. That will show you every time you’ve made a purchase using your debit or credit card. You can even download the banking app on your smartphone so that you can check it at any time.
Now, if you regularly use cash to buy things, you need to keep your receipts after every purchase. Then, log those purchases into a notebook. Do this with every expense you make using cash. To get the full perspective on your spending, write down your debit and credit purchases into the log, too. Do this for at least one month.
Soon enough, you’ll start to see patterns form. You spend twenty dollars on lunch every single workday. You buy coffee two times a day. You run up an expensive bar tab every weekend. You can clearly see the bad habits that have been hiding right under your nose.
Start a Budget
After finding your bad habits, you need to step back and re-evaluate how you’re spending your money. You want to be better with your finances, and you know that you need to make some changes. One of the most effective ways of cutting out your expensive habits is to start a budget. Plus, setting up a budget will push you to continue tracking your spending on a daily basis.
How do you start a budget? First, you have to decide what format works for you. You can take out a spare sheet of lined paper and make your calculations with a pencil. You can pull up an Excel spreadsheet and fill out the columns. Or, you can download a budgeting app on your smartphone and follow the instructions.
Then, identifying your financial position is the next step of the process. This means that you have to calculate an accurate assessment of your monthly income. Then, subtract the estimates of your monthly expenses, dividing them up into categories like rent, insurance, groceries or entertainment.
You can refer to your log to get a general idea of how much you spend on each category per month. Once you have all of the expenses, subtract them from your income to see what you have left. If you’re still unclear, you can click here for a budgeting overview that can guide you through the steps.
You will probably notice how your current situation is leading you to financial trouble. The next step is to take a look at your actual monthly costs and see if you can modify them to save more money and limit poor spending decisions. So, instead of having an inflated food budget that includes lots of fast-food, delivery and to-go coffees, you can trim it to focus on essential groceries and the occasional treat.
Try out these new limits in the next month. You will have to rinse and repeat until you finally get in the habit of doing it. It will take time. Adjust the budget every month to make improvements, adding room in some parts and tightening up in others. It won’t be perfect the first time.
If you’re having trouble getting the hang of this, you can visit David Sklar & Associates to talk to a licensed insolvency trustee (formerly known as a bankruptcy trustee) about credit counselling services and budgeting tips.
Avoid Impulse Purchases
Have you ever had the feeling that you had to buy something at the last second, but when you got home and opened up your shopping bag, you realize that you didn’t care about the item at all? Or that you completely forgot that you bought it? That is an impulse purchase.
An impulse purchase can be something as simple as a pack of gum or a celebrity gossip magazine that you put into your shopping cart when waiting in line at the grocery store. Or it could be an item that you saw was “50% off” while you were online shopping, and you just had to click on it because you didn’t want to miss the sale’s cut-off. It’s something you picked up because it felt good for a second — not because you needed it or even really wanted it.
You’re not the only one who does this. According to Finder Canada, 63% of Canadians have succumbed to the temptations of impulse shopping in 2018 alone. Altogether, they calculated that the total costs added up to $8.8 billion.
How can you avoid these types of purchases? First, you should learn how to recognize when retailers are pushing you to spend your money on these unnecessary items. For instance, one of the most popular tricks that retailers use to incite impulse buying is displaying small, low-cost items by the cash register. They do this because they know that you will have to stand in line for a little while, so you have to stop and stare at the display. And since the items are only a few dollars, you can afford to shove them into your pile at the last minute.
At the grocery store, you will see a display of flashy magazines, chocolate bars, gum and mints in front of the register. At a fast-fashion store, you might notice low-priced accessories like jewelry, hair clips, socks and wallets. A home goods store will have items like candles, coffee mugs and seasonal decorations in the same spot.
Here are some things that you should do to avoid impulse buys:
- Do not pick up any items displayed around the registers
- Do not participate in flash sales
- When online shopping, go straight to the checkout and ignore suggested items
- Do not shop when you are hungry, stressed, upset, intoxicated or bored
- Do not go hunting for sales, deals or discount events for an excuse to shop
- Only shop when you need to
Use Your Friends
Keeping up with habits can feel like a chore. You’ll be tempted to skip the responsibility for a day, and then eventually, your “cheat days” become cheat weeks, and you’re back to doing the bad habits all over again. To stick with the change, you need someone to hold you accountable.
It’s as easy as talking to someone you trust. Your close friends can help you break habits by acting as your emotional support systems and cheerleaders, making sure that you don’t doubt yourself and slip into an unhealthy pattern all over again. Telling a friend will also help them understand what you’re going through, which means they will work hard to keep you away from temptation. If they know that you are trying to cut down on spending, they won’t plan expensive trips to restaurants, bars or concerts. They will want you to succeed.
So, talk to your friends, your family members and your significant other. It may not be a fun conversation, but it will be worth it.
The last thing that you can do to get rid of your bad spending habits is to keep going, even when you make a mistake. You will probably slip. Don’t get down on yourself. You can readjust and keep moving forward. You can shake off the bad habit for good.