If you’ve recently become self-aware of your spending habits, it probably means something bad happened. Maybe you were hit with a slew of overdraft charges, had your card declined, or saw a ding to your credit score from missed payments or too high of a debt-to-income ratio.
You may feel bad and guilty about these things, but you’ve now been sufficiently humbled enough to admit your problem and begin changing your habits and rebuilding your credit. And here are five ways to get you started on the path to better financial decisions
Budget and Inventory
Find out what went wrong. Know your numbers – your income, how much your bills are each month, how much you spend on coffee, gas, groceries, etc. This will give you a clearer picture of where your money is going. Once you realize that you’re blowing a huge chunk of money at Starbucks or online shopping, you can start setting specific goals and boundaries for your spending.
Cash is Key
Now that you know how much comes in and how much goes out on bills and necessities, it’s time to set limits on your discretionary spending. The best way to do this is to convert to cash. Allot yourself an amount for clothing, coffee, or other “fun” purchases, and take out that amount in cash. The most important part – LEAVE YOUR CARDS AT HOME. I know, crazy, right? But when you have the back-up of your cards, you’ll find yourself quickly rationalize spending more than you rationed because you can “just throw the rest on the card.” This will add up, so be disciplined with your cash.
Create a Vision Board
Do some real soul-searching and figure out what motivates you to change your habits. Maybe it’s a trip, maybe it’s retirement, maybe it’s to lose weight, maybe it’s simply to have the security of an excellent credit score and a comfortable savings account. Whatever it is, make a visible reminder that will help keep you motivated. Hang a picture of your vacation destination in your office or as your screensaver, create a poster with a gauge you can fill in as you hit different savings goals, or a picture of a healthier you that you want to get back to. Whatever it is, remind yourself of it as often as you can to help keep your spending in check.
Dedicate someone to be your second opinion
When you’re in the moment, you may think that those shoes really can’t wait, and you need them here and now. But after a few months of sitting in your closet, you might see them and realize they aren’t as cute as they looked in the store lights. This is where your designated second opinion comes in. Before you’re tempted to purchase something impulsively, take a picture and send it to this person, and get their opinion on how important it is. Obviously, you’ll want to tell them of their role beforehand, and that your goal is to cut back on spending. They will help talk you down when the pressure is hard.
Skip the cart
Shopping carts are big and getting bigger. Seriously. If it’s just a habit to grab a cart when you go shopping, opt for a basket instead. You won’t be able to fit as much and your arm will get tired, so you’ll naturally shop and spend less. This will help you stick to your list and avoid impulse shopping, so skip the cart and reach for a basket or your own arms instead.
These tips can help you gain control of your finances and rein in your spending.