â€˜To buy or not to buy?â€™, 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
- Setting a worthy goal and
- Conscientiously making the proper buying decisions
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 :
Weekly budget : $300 Month : August 2008 Week : 1
30 â€“ Pizza dinner
30 – Pharmacy
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 â€˜money acquisition yearsâ€™ 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 â€˜needsâ€™ and those considered as â€™wantsâ€™. All living expenses like food, utility bills, transportation bills, housing mortgage and car loans go under the â€˜needsâ€™ category.
The â€˜wantsâ€™ 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 thatâ€™s â€˜to stop you from spending that moneyâ€™.
This article is shared by Jacquelyn Wong, a regular contributor for KCLau’s Money Tips.