Achieving the American Dream may seem like a rare occurrence today, but millions of people who grew up poor have still managed to land a job that pays significantly more than their parents made. While that may sound like a dream come true, many of them discover that more money does indeed equal more problems, as the old saying goes, because they grew up deprived and never learned how to manage excess income. If that describes you or someone you know, here are ten tips to create healthier spending habits.
Make a List of Your Values
Knowing exactly how you want to use your excess income will help motivate you to build savings. Do you want to travel, retire early, or have a swimming pool in the backyard? Understanding how your current expenses either add to or detract from those goals is crucial to achieving them.
Make a Budget and Stick To It
Plenty of digital budgeting tools are available to help you manage your finances. Figure out how much money you need per month for necessities by tracking your spending for a few months, then try to limit your spending to that amount. Next, work on building 3 to 12 months of savings, and finally, devote any remainder to longer-term investments.
Take Money Out of Each Paycheck Automatically
An alternative to meticulous budgeting is simply having a certain amount taken from each paycheck and deposited into a separate account. Not seeing money available in their primary account makes it easier for many people to manage, and helps them avoid the stress of monitoring every penny.
Use Cash Instead
Some people find that cash is more straightforward to keep track of than bank card purchases and the visual depletion of bills in their wallet helps reign in excess spending. Try withdrawing a set amount from the bank each week on a specific day to make budgeting more predictable, and devote that money only to a particular purpose, such as groceries or entertainment.
Avoid Impulse Buying
Establishing a three-day waiting period before buying any non-necessity items will give you ample time to consider whether you actually want it, discouraging impulsive behavior. And remember that even if an item is on sale, if you don’t really need it, it’s still a waste of money.
Watch Your Vices
Drinking to excess and gambling are two of the most effective ways to waste enormous amounts of money in short amounts of time. Do your best to avoid these behaviors, and to steer clear of the people in your life who routinely engage in them.
Change Billing Dates
Most monthly bills will allow you to customize the due date. Set them to the beginning of each month so they get paid first, leaving you with fewer unpleasant surprises later.
Avoid Temptation During Free Time
It seems everything worthwhile costs money these days, but it’s still possible to fill your free hours with activities that don’t tempt you to spend frivolously at every turn. Try visiting museums, parks, zoos, aquariums, and similar sites, or volunteering at an animal shelter or food bank.
Pay Raises Don’t Mean Budget Raises
It’s vital to avoid the trappings of “lifestyle creep” as you make more money throughout your career. If you get a 10% raise, that shouldn’t mean your budget is automatically increased by 10%. Do your best to stick to your previous budget and devote 100% of your raise to investments.
Talk to a Therapist
Growing up with scant resources can ingrain careless spending habits that can be difficult to break later on. Regardless of the other tools at your disposal, you’re more likely to be successful if you engage with a professional to help reshape your mentality about money.
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