Reader Q: How Do I Stop Spending So Much Money?

Last updated Sep 12, 2018 | By Laura Bostwick

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Spending money is much easier than earning it. And, for most people, it’s more fun. Whether it’s used to go out with friends, book a vacation, buy clothing, whatever – the more you spend, the sooner the money runs out.

But if you’re looking to break out of the mindset of “I have some money now, so it’s time to spend it all,” your finances are already looking up, so congrats!

The reality is, budgeting is hard.

Most Americans don’t even have a small amount of money set aside for an emergency, let alone a nest egg of substantial worth. Sometimes you might be able to focus your efforts and save up for a certain item, but more often than not, you’ll slip back into old spending routines as soon as the purchase is made.

We’re all guilty of it.

It’s like dieting. Cutting all delicious food from your diet and sustaining yourself on lettuce and water will work for a time (although I don’t recommend it), but you’re likely to fall straight back into bad habits very quickly, with no long-term success. Making a lifelong diet change means changing your entire relationship with food. No temporary diets, but instead a permanent, dietary overhaul.

It’s the same with money.

So how do you break this cycle?

How can you start budgeting smartly for the long-term and snap yourself out of the trap of allowing yourself to spend money simply because you have it?

The answer is a change of mindset. Altering how you think about money before you dive head first into budgeting can successfully help you change old habits.

"But spending frivolously is just so common for me – I don’t see how I can just jumpstart myself out of this lifelong behavior?"

Change is hard. Sometimes you need a bit of a kick to get started on some new money habits.

Do you have a savings account? If not, it’s time to open one and separate some of your money from your checking account. 

If you’re worried about giving in and raiding your savings, CD’s can also be a good option since you’ll only be allowed to access the money at certain times, usually yearly (although exceptions can be made in the event of a financial emergency). They can be a good way to essentially hide money from yourself, forcing you to follow through with a savings plan. CD’s do have varying minimum deposit amounts but you can usually see good interest earnings in a short amount of time.

"I think of my paycheck in terms of “bill money vs. spending money.” How should I be thinking instead?"

You hit the nail on the head with this problem. Many people are under the impression that once all the bills are paid, the rest is extra money that can be spent freely. It’s not.

The easiest way to change this habit is to start viewing a recurring deposit into savings as another “bill” you have to pay. Let’s say you earn $4,000 in a month and your bills only amount to half of that, then you need to create your own extra bill that you pay to your savings each month.

Experts usually recommend a solid 20 percent of your overall income (not just the income left after bills) should be saved. So, going back to our $4,000 earnings example, that person should be saving around $400 each month. That adds up fast.

"What about investments?"

Investing your money is a great idea. You should be putting some money into investments yearly if you can trust yourself to save for it, and monthly if you’re still working on teaching yourself to save more.

Many people avoid investments because the process seems confusing or risky, but it doesn’t have to be.

You don’t have to bet your life’s earnings on stock in some new company and risk your whole livelihood. That’s for people in the movies to do.

In reality, most people who invest place money in bonds or spread their money around in small stock investments all over the market, guaranteeing some net returns, even if you likely won’t become a millionaire. 

Tips for Training Your Brain to See Money Differently

1. Set Goals

Setting goals can work wonders on how you see your bank account.

Sometimes all it takes is playing a little game with yourself. Give yourself a number you want your savings to hit by a certain date and then try to reach that mark. Once you do, then set a higher goal. Give yourself small rewards for completing your savings goals. Maybe withhold that fancy hair styling or nice dinner out until your savings goes up by $1,000. If you have fun with it, you’re more likely to stick with it.

2. Ignore Everyone Else

Possessions can be deceiving. Try to ignore how others perceive you based on money and remember that impressions can often be wrong.

Having a brand new car and all imported furniture might give the illusion that someone is doing well for themselves, but in reality, it often signifies someone who is deep in debt.

Don’t buy things to try and convince the world you have more money than you do. Save the money so you can retire in style.

Remember, It Takes Time

It takes time to alter spending habits, so don’t get down on yourself if you don’t have an extra $30,000 kicking around your bank account by this time next year. Expect it to take a while, but keeping working towards the goal every single day. Once you’ve developed the habit and saving money becomes normal over time, you’ll be able to look around and realize you’re in a pretty sweet spot financially.