How not to Spend that Money?

‘To buy or not to buy?’, that is the question. How to stop yourself from spending that money? I believe everyone has faced this dilemma before. Whether it is to purchase an expensive item like that new SUV, designer handbag or even a small trivial item like a tub of ice-cream.

For those with plenty of money to throw around, this question is minor and unimportant. However for those living from paycheck to paycheck, it is a big question.

A common easy way to address this problem is by not carrying too much cash in the wallet or purse. This may help to prevent you from making various miscellaneous purchases. A similar method is not to carry or bring all your credit cards with you when going out. A third method would be not to go out shopping at all unless you actually need to get something.

Personally, to buy or not to buy boils down to my personal choice and decision-making. If it is a need then I will make the purchase and if it is a luxury, I do not make the purchase or will delay it to a later date i.e. once I have set aside a budget for it. Everyone has this choice to decide what to do with their money.

My Three Proven Formulas

The formula that works for me consists of

  • Budgeting
  • Setting a worthy goal and
  • Conscientiously making the proper buying decisions

Budgeting

Budgeting is straightforward enough. There are many versions and it can be broken down into weekly, fortnightly or even monthly budgets. Below is an example of what a weekly budget might look like.

Weekly budget : $ Month : Week :

Day

Food

Children’s expenses

Transportation

Others

1

2

3

4

5

6

7

Total

Weekly budget : $300 Month : August 2008 Week : 1

Day

Food

Children’s expenses

Transportation

Others

1

4

30

2

4

30 – Pizza dinner

3

4

4

4

5

4

6

30 – Pharmacy

7

150 (Groceries)

Total

150

20

30

60

Grand total : $260 Balance : $ +40

If I see that I have gone over-budget then I will reduce expenses in the following weeks. In the example above, I have a surplus of $40. This may either go towards my savings or it can be carried forward to the rest of the month. Bear in-mind that I have already made a deduction of 15% from my take home pay that immediately goes towards my savings fund.

The budget stops me from spending money by showing me how much savings will be lost if I make that purchase.

Setting A Worthy Goal

Set a goal for yourself or it can be a few goals that you really want to achieve. It has to be something that you are willing to make sacrifices for. My goal is early retirement and having sufficient retirement fund. It scares me to death thinking about living in poverty during my retirement years. So during my ‘money acquisition years’ a.k.a working years, I am determine to stash away as much money as possible to ensure my financial security.

Having a worthy goal prevents me from spending unnecessarily and helps me to stay focus on my planned budget.

Conscientiously Making Good Decisions

Conscientiously making proper buying decisions requires a lot of work. It means defining which purchases are considered as ‘needs’ and those considered as ’wants’. All living expenses like food, utility bills, transportation bills, housing mortgage and car loans go under the ‘needs’ category.

The ‘wants’ include eating out, going to the movies and shopping for clothes or shoes. Gadgets or electrical appliances, sporting equipment and hand-phones all go under this category as well.

If I do have to purchase something, I do not go for the best or most expensive item. Some of the criteria that I will consider are the price, the quality or durability, the warranty period if any and the functionality.

Conscientiously making the proper buying decisions prevent me from making the wrong purchases that I might regret later on.

It is empowering to know that my efforts have significantly contributed to increasing my net worth. I can see the results and proof of my efforts from the net worth calculation that I do at least twice a year.

My formula works for me. Therefore, spending money by cash or by credit card makes no differences as I have my formula to keep me on-tracked.

You may have a different formula that works for you. It does not matter which formula is the best as long as the end-purpose or goal is met and that’s ‘to stop you from spending that money’.

This article is shared by Jacquelyn Wong, a regular contributor for KCLau’s Money Tips.

30 Comments

  • Relax

    Reply Reply September 9, 2008

    Thanks for your useful tips.

    I always see my spending decision a resource allocation decision. Money (and other resources like time, energy etc.) is allocated to buy certain things. Is such resource well used to get the goods? Does the goods benefit me in some way? Is the benefit long term or short term? etc.

    There is another money philosophy….

    Income – Saving = Expenses

    Every month after getting pay, a portion of money is saved or invested. The rest of the money is used for spending as much as you like since the saving is already allocated to our financial planning so it is up to us to use the remaining money freely.
    Some people might want to do so but for me I will save as much money as possible for my future.

  • Jonathan

    Reply Reply September 9, 2008

    Very practical tips indeed. Thank you for sharing.

  • GCC

    Reply Reply September 9, 2008

    Hi, I throughly enjoy your site and find it very educational!

    I prepare my monthly budgets on Excel and use the same spreadsheet to keep track of actual expenses. This way, I can do a simple budget-to-actual expenses analysis. The analyses rarely shed new light on my expenses because I am thrifty and usually already have a good handle on my spending.

    However, I find the spreadsheet helpful in putting expenses into the right perspective for me. In other words, it tells me where I should focus my attention on, when I need to cut expenses, and it lets me know what types of expenses are relatively insignificant, so I don't need to sweat over them. It is easy to do the above by categorising the expenses and using percentages.

    I do buy on impulse, but only when it is inexpensive and infrequent. If I get carried away in a given month, that will be highlighted on the spreadsheet and I get a gentle nudge.

  • KCLau

    Reply Reply September 10, 2008

    I am sure that you will be a very rich man!

  • KCLau

    Reply Reply September 10, 2008

    Hi Jonathan, you are welcome!

  • KCLau

    Reply Reply September 10, 2008

    Hi GCC,

    Your great habit is going to earn you a lot of money.

  • GCC

    Reply Reply September 10, 2008

    Like most middle-class Malaysians coping with inflation, I have no choice mah. Either learn to spend wisely or get buried in debt. I'm probably a smart consumer at this point, but only a beginner investor. That's why I'm drawn to a site such as yours. Thanks for making your tips easy for us beginners to follow.

    I'm reading a textbook called “Fundamentals of Investing.” The authors are Gitman and Joehnk. The textbook is very well written and is not intimidating since the authors avoid being too quantitative. It is, after all, a “fundamental” book. It covers the basics in a very systematic fashion. Readers are advised to create investment objectives and plans before learning about investment vehicles. And even before that, readers are asked if they are in the right circumstances to invest. For instance, people should first have adequate savings for emergencies and have adequate insurance before investing. Common sense topics but good reminders nonetheless.

  • KCLau

    Reply Reply September 11, 2008

    Hi GCC,

    Is it possible for you to write a review on this book (Fundamentals of Investing).
    I can post it here for other readers to learn about it.

  • GCC

    Reply Reply September 11, 2008

    KC, as it turns out, Pearson, the publisher, puts out detailed information on its website:

    http://www.pearsonhighered.com/educator/academi

    Here, you'll find links to a detailed table-of-contents, previews of chapters etc.

    There is also a companion website for students using this textbook. In it, you'll find resources that are specific to each chapter:

    http://wps.aw.com/aw_gitman_fundinv_10/60/15413

    The main things I like about this textbook is its thorough yet systematic approach to investing, and its easy comprehension. One more thing I like are the useful internet links associated with the individual concepts/topics being presented. So, if you want to delve deeper into the subject you're reading, relevant links are provided on that same page.

    Understandably, alot of the topics are glossed over, since this is only an intro textbook. For example, chapters on technical analysis and on options are frustratingly brief. But at least the reader is made aware of these topics and suggestions ARE given for further study.

    I think of this textbook as a general guide.

  • GCC

    Reply Reply September 11, 2008

    BTW, everyone knows how expensive imported textbooks are. The US edition retails for 3-400 ringgit. Fortunately, for developing countries, there is an “international edition” that cost about a 1/4 of the price. Same content as the US edition, but in softcover.

    There are online booksellers in Thailand and India who will ship to Malaysia. I don't know if the book is available at local shops.

  • Yvon Thea

    Reply Reply October 10, 2008

    I also keep track of my daily expenses.

Leave A Response

* Denotes Required Field