One of the main reasons some people are successful at money management is that they take active steps to improve their situation rather than waiting passively for their problems to resolve themselves.
Here are four tactics to bring you into the winners’ circle. Best of all, they are easy to implement!
- Use cash
Using credit cards is a very easy way to overspend since you do not feel you are using real money but rather just swiping a plastic card. Did you know that a McDonald’s study showed that folks who paid for lunch with a credit card spent almost twice as much as those who lay out cash? Moreover, many people who use credit cards don’t review their monthly statements and have no concept of how much money they are actually spending.
Seeing the greenbacks disappear from your wallet reinforces the fact that you are spending. And when the money is gone, you can’t spend anymore.
Keep a cash-only budget by withdrawing money weekly or monthly from an ATM and only spend what you have. This will help you to focus on buying things that you actually need.
Bonus Challenge: Try challenging yourself at the end of every day to save any change from your wallet into a savings jar. Over time, these coins add up to a significant sum.
- Don’t buy something just because it’s on sale
Before you purchase an item, decide if it’s something you really need, or you are buying it just because it’s on sale. Remember, sales are created by professionals whose entire mission is to get you to part with your hard-earned money.
There’s nothing wrong with getting a discount when you buy something, but don’t buy something just because it’s on sale! The only time I would go against this advice if the sale is on a non-perishable item (say toilet paper) that you know you will use in the future, and you have both the space to store it, and the cash flow to buy it now (without overshooting your budget).
- Don’t spend just because you work hard
People like to work for a reward, but working hard isn’t an excuse to spend money. After all, your income doesn’t always expand proportionately to how difficult your work has been lately.
You should definitely use your hard-earned money to enjoy life (when it fits in your budget), but you shouldn’t use your hard work as an excuse to spend.
- Don’t spend extra for special occasions
Everyone likes to celebrate, and we should all commemorate the special times in life. There is nothing wrong with a modest celebration… just don’t go into debt to fund a huge event.
Don’t spend thousands of extra dollars on special occasions, such as weddings or college graduations. Rather, focus on the occasion itself. Realize that the uniting of two people in marriage is not about the wedding celebration; rather, it is about the years of growth together afterwards. (And for that, it wouldn’t do any harm to have some money in the bank….)
All of these four tactics have one thing in common: increased awareness.
Being aware of how and why you spend money helps you make sure that your expenses are proportionate to your income and stay within your budget. Be sure to implement these four money management tactics so that you too, will be able to oversee your money and become a financial success.
For more simple tips on how to build your budget, click here.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner (CFP®)