Tuesday, July 6, 2010

Tips for Recovering Spendthrifts

I'll let you in on a little secret.
I like spending money. I've even gone recreational shopping more than once.
While I may never have spent enough in one go to have earned the title of true blue spendthrift, there definitely were times where we were bringing in ample cash, but still hard a hard time making it through the month because of our unwise spending habits.
I like spending money, but I like having money to buy basic necessities more.
Because of that, my husband and I figured out tricks to curb our spending habit, tips that can help everyone waste less money, but are especially suited to people who need to work hard to resist the urge to splurge.

Tips for the Recovering Spendthrift

Admit it.
If you think you've got great spending habits, there's nothing to talk about. Change only can come if one realizes that he has a problem. The first step in recovery is always admitting the problem.

Figure Out Why.
Before anything else, you have to decide why you need to change your spending habits. Have your spendthrift tendencies left you not enough money to pay your bills? On the lesser extreme, have you fiddled away cash on frivolities instead of saving it up for your dream, whether it be a vacation, buying a home, paying for your children's college, or paying for your retirement? Have you racked up lots of debt to pay for your habit? Decide why things must change before you solidify your resolve to change things.

Where's the Money Going?
Figure out where your money is ending up. I've heard too many people say "We make a decent amount of money, but somehow we have nothing left at the end of the month." Don't be that person.
Know where your money is going.
For a month, write down every single time you or your spouse spend money. Even 75 cents at a vending machine. 10 dollars for takeaway. 1 dollar for the bus. Write down every single time you spend money, whether little or big.
At the end of the month (or during), tally up the total spent in different categories,  preferably on Excel or on a google documents type document. (See sample here.)
Are you spending large amounts of money on takeout? Do you want to be? How much are you spending on groceries? More than you should, or are you happy with the amount?
Any purchases you're embarrassed of?
Now that you know where your money is going, it's time for the next step.

Be Willing to Change
Once you've got the cold, hard facts in front of you, look it over. Do you want to continue spending the way you have? Are you perfectly content with your spending  habits? If so, you don't have to read any more of this post, as I can only help someone who is willing to change. Insanity is doing the same thing over and over and expecting different results.
If you've decided to take control of your spending habits, read on.

Make a Budget
Look over where you tracked your spending. Note mistakes and things that can remain as is.
Divide up your monthly income into different categories.
Allot money from your income for each category. Perhaps allot 300 dollars each month for groceries, and 20 dollars for household expenses. 30 dollars for entertainment, 100 dollars for medical care.
I'll break this down in a further post, but you can only allot money for categories if that money actually exists. The sum total of all the budgeted money cannot exceed your total monthly income. Be sure to include money for emergencies and savings as well as for one time expenses, like buying a new car.
Once you have your budget, that's it. If you've only got 55 dollars left of your monthly grocery budget, that's all you've got to spend. No more. You can only spend the money you've allotted to your category of expense.

Cut Your Credit Cards
Credit is the reason the US economy went down the drain. Relying on money that you do not have, borrowing money from the future is guaranteed to get you into trouble.
Even though there is responsible use of credit cards, very few people truly use credit cards completely responsibly, and only spending money that they already have in the bank, instead of paying off the full balance monthly with your current paycheck.
As most people do not use their credit card responsibly, the first spending habit to change is using a credit card. Get rid of it. Cut it in half. Do whatever you need to destroy the card and make sure that you won't be filling the coffers of the credit card companies.
Yes, money back. I know certain credit cards offer you cash back for your purchases, but I'll wager that unless you've got your spending completely under control, you're probably spending more "extra money" each month because you have a credit card than the amount of money you're "making" each month.
Get rid of the credit card.
At some point later in the game when you know you won't be using a credit card irresponsibly, you can apply for a new one. In the meantime, toss it.

Don't Debit
Though a debit card is much better than a credit card, if you're a spendthrift, eliminate plastic completely. Yes, you're able to keep track of your spending daily via the internet. Yes, your bank balance reflects what you spent on your debit card, and you're only spending money you actually have.
When you're swiping a card instead of paying cash, you don't feel like you're actually really spending something, even if your brain knows it. Its easier to swipe 100 dollars on that debit card than it is to fork over 100 dollars. I mean, people like money and don't like giving it up easily. You don't really wanting to be handing over that Ben Franklin to the salesperson, so when you swipe your card, you get to pretend in your mind that you didn't really spend that money, when the reality is that you definitely did fork over big bucks.
Ditch plastic completely and use cold, hard cash whenever possible.

Take Limited Cash
Along similar lines as the note about debit cards, when you have a whole wad of cash with you, spending an extra 5 or 10 dollars doesn't seem like that big of a deal. The truth is though, that all those 5 dollar bills add up to hundreds and thousands quite quickly.
When you bring with you only exactly the amount of cash you estimate you will need, you're less tempted to waste money, simply because there isn't enough. If you've got a total of 55 dollars in your wallet, you won't want to spend all those 55 at once, because you won't want to be stuck with no cash at all.
By taking limited amounts of cash with you on excursions, you limit the amount of money you can spend at once and help keep those spend thrift tendencies in check.

Avoid Temptations
If you know that driving past a Dunkin Donuts sets off the urge to splurge and you can't help but resist to pull in and buy a treat, avoid driving past that donut shop if you can help it. Do you know that you end up overspending when you're in the mall for specific reasons? If at all possible, go to an alternative store so you don't feel the pull into those "dangerous stores" that you get when you're in the mall.
If you're truly a spendthrift, remember you're like an alcoholic. An alcoholic shouldn't keep vodka in the house even if he swears up and down he won't drink it, and shouldn't go out to bars "even for a coke", because the temptation is too great. If you have such a hard time resisting the urge to splurge, you should even go to the extreme to resist temptation. And whatever it is, don't go into that store just to "window shop".
People may think you're being extreme, but you're not. Once you've got your spendthrift-ness in check, you can resume life without resorting to the extreme, but in the meantime, extreme is the only way to go.

Learn to Say No
Saying "No" is a skill you need to practice. By being willing to do anything or to agree to anything asked of you, you're probably costing yourself more than you can afford.

Saying "No" to Bargains
Telemarketers frequently call us offering us "amazing deals" in exchange for a credit card numbers. I've previously written about saying "No" to telemarketers but it bears repeating. When telephone sales people call you up offering you "the bargain of the century", it frequently is not quite as cheap as they're making themselves out to be. Too many people just agree to buy what the sales person is offering simply because they want to get them off the phone and are too polite to hang up in their face. Be firm and resolute. Simply say no at the beginning of the call. Tell them  "I'm sorry, but we don't need whatever it is you're offering. Have a great day."
If you do listen to their offer and it does sound like a great deal, ask for a number to call them back. It may be cheap, but you can probably find an even better price. If the sales person doesn't want to give you a call back number, that usually is proof that their prices are too high and they're afraid that you won't call them back because you've found better. A resistance to giving you a number to allow you to first research if the deal is a good one should set off alarm bells in your head that this is not where you should be spending your money.
If you want what they're offering, do research, comparison shop, and find a deal that is truly a bargain; don't simply believe sales people when they claim it is the deal of the century.

Saying "No" to Friends
If your friends want to get together in a place that involves spending money, be firm and tell them "No. I can't be spending money there now, so I'll have to pass on that get together." Consider offering an alternative venue, one that doesn't eat you out house and home. Perhaps go make a picnic in a park, or hang out at the boardwalk with homemade drinks instead of paying exorbitant prices in a coffee shop.

Find Like-Minded Friends
If your friends do not respect your wishes to save money, and especially if they try to make you "lighten up and live a little" (on your dime, not theirs, obviously), it may be time to find new friends. Your social life should consist of people who do not mock your toning down of your spending habits. If your friends are causing you to spend or make you feel bad about your efforts to cut back, you may need to cut them off.
Try finding new friends in places that are geared towards the thrifty; perhaps hanging out in bargain shops or striking up conversations with people at garage sales will help steer you towards people who are not detrimental to your overcoming your spendthrift habits.
If you can't find anyone local, at least fortify yourself with an online social life, like at Diaperswappers.com's thrifty forum. People who encourage your thriftiness definitely helps you remain resolute.

24 Hour Rule
Any purchases above and beyond what is absolutely necessary for life should be given a great deal of thought before handing over the money. That plasma TV may seem like a good deal, but upon sleeping on it, you may decide that you're perfectly content with your perfect TV and have no need for the upgrade.
By waiting 24 hours after deciding to purchase something, you'll help ensure that you're only spending money on things you really want and not on impulse buys.

Buddy System
Even if that seems like a good deal to you, your husband may not agree. That is a good thing. Make an agreement with your spouse or friend that you'll run by any purchase above x amount with your buddy. My husband and I call each other up if we want to spend more than 20 dollars in one go (aside for our predetermined grocery shop amount). By bouncing an idea off of someone else, you'll be able to double check if that really is a good place to be spending your money.
In most likelihood, your buddy will think that it is a nonsense purchase that should be avoided, but during those times that he does agree that you can spend the money there, still sleep on the purchase before making it.

I hope these tools help the recovering spendthrifts among you. Perhaps they'll be of use even for those of you who have their spending habits relatively in check.

What do you do to make sure that you don't waste money unnecessarily? Do you follow any of these tips? Disagree with any? Why?

Part of Penny Pinching Party and Works for Me Wednesday.


  1. I have realized that acquiring "things" is stems from the insecurity that craves a sense of "control" over my circumstances. Men like tools and equipment for this reason, because they increase our ability to achieve physical changes, or make things happen. Women supposedly get more sense of "control" from relationships, particularly ones that they can prove by spending the blokes money, especially on stuff to make blokes ( or other women) pay more attention to them. Perhaps, its also a sense of compensation for having grown up in habitual "poverty consciousness", with parents who were very sparing with indulgences for me, although they gave lots of special things to my sister. Out of a misguided sense of self respect, I used to buy things for myself because I wanted to freely assert that I was "worth it". Now, forced to live on limited means after a series of robberies that have taken away my safety net, I can see "control" becoming available by having a reserve fund that will mean I don't have to depend on others, including the blood suckers at the Bank. No one is going to know about this, and I am just going to revel in the fact that I leave it untouched as long as possible. I hope this comment helps someone else see their own problem from an analytical point of view, and find a way to reduce the stress that they used to deal with by spending.
    If so...... send me $5!!!! ( Just kidding, save it for your own safety net!)

  2. If you take limited levels of cash along with you on activities, you restrict the amount of money you are able to spend at the same time and help to keep those invest thrift habits in check.


Share This