- RESIST:
It’s no surprise that money and the economy are the top causes of stress for Americans, according to the American Psychological Association’s “Stress in America Survey.” One way to understand willpower is that it is like a muscle: it can become tired. Research has concluded that people whose willpower is run down are more likely to spend more of their money, purchasing additional items, than those who haven’t recently exerted their willpower. Low willpower, research suggests, can lead to less control over spending.
People who are constantly faced with tough financial decisions, such as those who are less financially stable, tend to more readily deplete their willpower. Research shows that certain strategies can help strengthen your self-control when it comes to spending.
- Plan your purchases. Create a monthly budget and stick to it. Include only necessary expenses in your plan. When you plan your purchases ahead of time, you’re less likely to make impulsive buys. Make one financial decision at a time. When people are faced with multiple, decisions that test their willpower, that willpower can easily be depleted.Track your spending. Research shows that tracking can be an effective tool. Keep a diary of how you spend your money. We devoted an entire section of this series to TRACK.
- Unsubscribe from marketing emails. Those tempting sale emails can lead you down a spending rabbit hole. Unsubscribe from marketing emails to avoid the temptation.
- Avoid boredom shopping. When you’re bored, it’s easy to browse online stores or visit retail websites. Instead, find other activities to occupy your time and distract yourself from spending. Avoid the temptation. Staying away from shopping malls and stores can help you manage spending, just as an alcoholic should stay out of bars.
- Leave your credit card at home. If you’re going out and don’t need your credit card, leave it behind. Having it readily available can lead to unnecessary spending.
- Save automatically. Set up bank or investment accounts that draw funds automatically from your paycheck.
- Discuss with others. Talk to your friends, family, and co-workers about the best strategies for avoiding unnecessary expenditures. You will be surprised to learn how creative some people can be when it comes to overcoming binge and unnecessary spending.
In previous sections we emphasized the need to INSPECT and TRACK our spending habits. We delineated what constitutes WASTE costs to drive to zero, as well as NON-VALUE ADD costs that should be minimized. These are items that depreciate, such as cars, furniture, and apparel.
Once you have a handle on how to control your spending, you will have money left over for saving. And savings should be limited to what is needed for an emergency. Any amount above emergency funds should be INVESTED. Investments can be great fun; the process is not as complex as many people may think it is. If you stay away from speculative investments, and exotic investments such as derivatives, you can make 10-100 times greater return on your money than if you let it languish in your savings account.
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver,” said the philosopher Ayn Rand.
This series is intended for the average person who probably never took a single course in personal finance and knows little about money management. I was disappointed in the attempts the media use to try to convey some of these basic and fundamental guidelines, so I wrote this primer to fill in the gaps. I hope it helps you.
