Who would not want a comfortable and lavish lifestyle? We think the answer is almost everyone wants it. So, where is the problem? The problem is setting up the right financial goals and working toward them. Most people lose track. But why do people lose track? They lose track due to their spending habits and poor decision-making. Your spending habits have the power to push you into the debt trap if you do not control them in time.
So, does that mean controlling your spending habits can help you become financially independent?
Knowing your spending habits can help you analyze and effectively control your finances. Instead of going haywire with your income every month, it is better to plan, budget, and spend your money wisely. Now, you must be wondering what you can do to improve your finances by understanding and controlling your spending habits. We will get to it, but first, let us see some common spending mistakes people make.
1. Not budgeting
Yes, not opting to make a budget is where the problem starts! We think we can manage our expenses and keep everything in check, but spending without a budget is like driving a car with no brakes. Unplanned expenses lead to financial mismanagement, and you will not even realize where you spent your money. Budgeting or planning your purchases can help you to keep track of every rupee you are spending. Budgeting would also help you to streamline your expenditure and savings for rainy days.
2. Retail therapy
Have you ever caught yourself saying, “I was stressed, so I bought it”? If the answer is yes, then you need to reconsider your spending habits. Retail therapy might make you feel better for a while, but you will eventually feel the financial burden which will cause you more stress. If you are spending money from your disposable income, it might not harm your financial health as much as spending from credit cards or savings would. Credit cards harm your financial health the most when you use them blindly for every expense. So, give it a thought and decide if it is worth the stress?
3. Choosing WANTS over NEEDS
Let us take an example to explain this- you already have a laptop that works well, you do your routine work on it, it does not hang or slow down every time you have to switch windows or programs. But your favorite brand has launched a new laptop, and now you want to buy that laptop. On the other hand, you have to renew your health insurance. Now, you have to pick one- the NEED or the WANT. Choosing your wants over your needs can put you off your financial plans.
4. Impulse buying
Never take ‘I want it, I got it’ literally when it comes to real life. We mean, yes, we understand that a festive sale with discounts up to 60% is tempting. But making a big purchase just because an item is available on sale and you might not get similar discount rates in the future should not be the reason behind your decision-making while purchasing it. Impulse buying harms your financial health in more than one way. Poor spending habits have a high impact on your financial health, and poor financial decisions can lead to poor financial health.
5. Overspending or not tracking your spending
Are you asking yourself, “Why should I budget if I also have to track my spending”? We will tell you! Having a budget and tracking your spendings are two completely different things. With budgeting, you can learn to save for a secure financial future and divide your income into different categories according to the average expenditure per month. Tracking your expenses helps you to analyze and understand your spending habits. It will help you make sure that you are not overspending from a category. Just imagine going to a restaurant, eating, and paying for the meal, but then you realize that you do not have enough money in your account to pay, sounds scary, right? You can prevent such incidents when you start to track your spendings.
In conclusion, bad spending habits can get in the way of a secure financial future. Analyze your spending habits, make changes to your lifestyle if required, and learn to adopt good spending habits to accomplish your financial goals. You can start with small changes like budgeting, setting goals, making lists while shopping, and planning your purchases.