What do you spend your money on?

What people spend their money on will vary. It can be anything from a daily coffee or bought lunch, through to spending up large on sales items, keeping up with trendy friends, or just enjoying the feeling of a shopping spree. Most of us spend money on entertainment too, which can be expensive.

Spending can make us feel good but, often, this feeling is temporary. If we’re spending money we don’t have, for example putting things on a credit card, or buying things we don’t need, we can be remorseful later.

Change your way of thinking

A lot of it comes down to thinking before you spend. So, how can improve your spending habits? These thought processes may help:

· Don’t buy anything to keep up with others. If you buy something, you don’t want to regret it later.

· You need to be able to rationalise your spending in your own mind, whatever that rationale may be.

· Spending on your ‘need’ items should always be a priority. My very simple rule – anything that I can’t live without, is at the top of my spending priorities. Everything else, I can wait or save up for – called a ‘want’.

· Make sure that you have the money to spend in the first place. Don’t borrow to spend for your daily expenses – whether it is for ‘need’ items or ‘want’ items.

· Use your credit card sparingly and make sure that you have money in your bank account for paying off the credit card bill at the end of each month. Paying off only the minimum amount on your card is an expensive proposition. Avoid it at all costs.

Practical tips to cut your spending

This is all very well, but not all of us are very disciplined with our money. Perhaps that’s why you’re reading this article in the first place.

Some practical tips for an action plan might include:

· Make a list of things you ‘need’ to buy and the things you ‘want’ to buy

· Allocate a budget to each category

· Give yourself weekly spending money and stick to that amount. If you spend it all before your next allocation, tough luck, you will just have to wait. If on the other hand, you still have some money left at the end of the week, put it in your savings account. This serves as a great incentive and at the same time by removing that amount from circulation, you’re avoiding the temptation of overspending in the coming week.

· If you’re an impulse buyer, leave your credit card behind and use your debit card or cash. Credit cards are ‘invisible money’ which doesn’t seem real, so avoid them if you’re trying to control your spending.

· Keep a daily spending diary. You’ll be shocked how easy it is to spend money without even thinking. You might not even know where it’s going. The diary will help you keep an eye on your spending.

Goal setting: Cut your spending and focus on your future

If these tips don’t excite you, there’s another incentive you can try.

Set some medium to long-term goals. A holiday? Buying a house? Christmas?

Better still, make your goal visual and stick it on your fridge where you can measure the progress you’re making towards achieving it. Nothing is more motivating for you, and your family, to see that you’re inching away towards your goal.

First published 9 October 2018

Story by Dr Pushpa Wood

Dr Pushpa Wood is the director of the Westpac Massey Fin-Ed Centre, a research and education centre based at Massey University that aims to help improve the financial wellbeing of New Zealanders.

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.