Sunday, February 6, 2011

Financial Survival - Controlling Your Spending

While by no means a financial guru, a significant part of my life was spent working in the financial services industry prior to entering the field of corrections. During this time, the most significant thing learned was that you can’t get out of debt until you learn to control your spending. It often doesn’t make a difference in how much money you make. An increase in income is usually accompanied by an increase in spending (the old “the more you make, the more it takes” syndrome). The real problem affecting most people is how much money they spend. You need look no further than the current economic state of our country to realize this fact. Uncontrolled spending will eventually lead to uncontrolled debt.

Now a certain amount of debt is sometimes necessary in order to achieve both short and long term goals in our lives. Debt in and of itself is not the real problem unless it is incurred without a realistic or actual need. This is where many people encounter a major problem. If you cannot distinguish between your needs and wants, your spending may wind up out of control. If you need transportation, will a used model fit your budget better than a new one or will fixing the old one be a cheaper option? Do you really need two vehicles or can one do the job? Can you afford to buy a new or different home or do you just need to refinance the debt? Or will renting be a better option for the short run? You need to ask yourself serious questions when it comes to controlling your spending.

People sometimes feel guilty when they have to spend money and their financial resources are limited. You should never have a guilty feeling about spending your money if its purpose is to cover basic needs. Food, clothing, transportation and shelter are all basic items that are required by everyone but it can become a problem if the amount of money you are spending goes too far beyond your basic needs. We all want bigger and better things in our life but in a realistic world with limited financial resources this isn’t always possible. This is where we all need to realize that it is actually easier to live within our means and avoid creating excessive debt.

If you are spending more than you earn, you are going to encounter problems. Putting things in a simpler context, it’s usually easier to spend less than it is to earn more. Don’t rely on a pay raise or a promotion that may not happen to cover excessive spending habits. Finding a better paying job than the one you currently have is an option but may not be possible. This is especially true in today’s economy of rising unemployment rates and increasing lay-offs and cutbacks in personnel.

One of the easiest ways to control your spending is to become a buyer instead of a shopper. Many retail outlets design ways to keep people in their stores longer because they know that many people have uncontrolled spending habits. They know that you will spend more money if they can keep you in their store for a longer period of time. They go out of their way to take advantage of this fact. It’s a known fact that the longer you are in a store the more money you will spend. They move merchandise around inside the store (they call it a “reset”) knowing it will take longer for you to find what you need in the hope that you will buy additional merchandise. They have multiple check-out counters but only one or two are open. They know people become frustrated from waiting in line and will often resume shopping (which makes them feel better and less frustrated) rather than wait in line at the check-out. You can avoid these situations by making a list of what you need and buying only those items you need. You will be pleasantly surprised just how much money you can save by doing this.

Sometimes the problem is our own actions. Many people are aware of the old saying “Never go grocery shopping when you’re hungry!” and yet will do just that. The fact that you are actually hungry will often lead you to purchase items out of a response to your hunger than an actual need on your part for those additional items. If you get home from the grocery store and wind up asking yourself “Now why did I buy that?” you may have fallen into a spending trap of your own making.

No matter how much or how little you make, you'll never get ahead if you spend more than you earn. It's normally going to be a lot easier for you to spend less than it will be to earn more money. It usually won’t require making a big sacrifice on your part but it will require you to make wiser and more informed choices when spending your money. Don’t wait until you’re unemployed or suffer a lay-off and wind up forced into a situation where you have to make drastic cuts in your spending habits by necessity rather than by choice.

People are creatures of habit. Some of our habits are good and some are not so good. Getting in the habit of making wise choices in how much you spend and on what will take a lot of effort on your part to be successful.

Don’t make the mistake of falling into the spending trap. During tough economic times, your best defense for financial survival is learning to control your spending.

Staying above the water line!

Riverwalker

14 comments:

idahobob said...

Budget, budget, budget. Do not deviate from the budget.

Cash only, NO credit cards....period.

If you have the infernal plastic cards, cut 'em up and notify the card company that you are no longer wish to use their services. If you have any debt, at all, make it the #1 priority in your budget. Get out of debt as fast as you can.

Bob
III

chinasyndrome said...

RW,but but with so many Guns,30rd mags,knives,ammo,etc,etc AND then these stupid pesky utility bills whats a guy to do? Electric bill comes in and I am eyeballing the new tactical mini-14! I really need restraint.. and I still want M1-a,oh yeah xd-m,Springfield GI,Ruger kp-100 and Champagne taste on a corona budget!

China
III

Ken said...

...i'm on a pretty strict budget,and no matter how i try,sometimes i still tank it...i've been cash and carry for a long time now,that is the first thing i recommend...only "take" a little more than ya need,if you have finite resources yer less apt to part with it...

hmmm,word verif is retagne(retain???)that's funny...lol

Ryan said...

I think this is a great example of 'if it ain't broke don't fix it'. A guy who keeps in good shape and maintains a healthy weight by enjoying casual but regular running and eating reasonably does not need a professional trainer and a strict dies to maintain. However a guy who is 50 pounds overweight and gets winded walking to the car needs professional guidance and a strict diet.

Wifey and I do not have a zero dollar (all money allocated) budget. We did that a couple years back but recently have kinda loosened up. Not that we are spend more just that we stopped trying to predict and budget all the little stuff. We save a given percentage, put other money here or there, have few bills, try to keep groceries and entertainment close to a set amount and it works pretty well. Sometimes we spend a bit too much and the checking account runs a little low. Other times we don't end up buying much of anything and it builds up.

I don't feel the need to try and say how much we will spend this week on gas or if we will need cleaning supplies.

Personally we use debit cards for most transactions. A lot of this is personal preference and a generational thing. If we spent $200 on groceries instead of the planned $60 with a card we would bring cash.

As long as you spend less than you make and save the difference you will be good. The biggest thing with that is getting your head right. Then you just tweek how you budget and if you use cash, checks or cards to make it work.

Adventures in Self Reliance said...

I got smashed to rock bottom becoming disabled. My parents bailed me out of debt and I got to keep my home and stuff. But all in all they paid over $30,000.00 clearing debts catching up bills and so forth.
Well I swore never again. I have managed to pay them back about $29,000.00 and I am debt free except for them and the Mortgage. Needless to say I got really frugal/cheap on the costs I could control.
But every time I bake 5 loaves of bread I know I have saved anywhere from .70 cents to a dollar on each loaf compared to buying it in the store. Plus I don't think anything tastes better than homemade bread.
Both Sears and Kmart offer layaway. My local pawn shop offers layaway for guns and other stuff.
I admit I went cheap/layaway plan to start my arsenal. Most of my guns are ugly, cheap and functional, but that's okay because I'm past the panic mode of prep and I can wait for the good buys and sales. Yet I have the basics.

riverwalker said...

To: idahobob

A budget works great if it's something you can live with but if it's not realistic and allows you some leeway it will be hard to follow.

You need to include amounts for both savings and emergency purchases as well. Too strict a budget can hinder your efforts and is a common mistake that is made.

Thanks bob.

RW

riverwalker said...

To: chinasyndrome

Sounds like you may need a part-time job. I've got two part-time jobs myself and still find it difficult to feed some of my bad spending habits.

Mrs. RW doesn't cut me a lot of slack when it comes to maintaining our budget.

Being a "gear junkie" is tough...

Thanks China III.

RW

riverwalker said...

To: Ken

If you keep a little slack in your budget and can maintain a an amount close to what is budgeted, it will allow to realize how long before you can fit something extra into your spending. This will also allow you to build up an emergency fund.

This enables you to prevent damaging your budget or leaving you with extra debt that gets harder to pay off if something unexpected does happen.

I normally don't consider anything left over "extra" if the emergency fund has been dipped into to pay for major expenses or repairs (i.e. recent roof repairs from storm damage)until my emergency fund is re-established.

I also try to budget a set increase in the amount of my emergency fund to give me a better margin of safety if I need extra cash for unexpected expenses.

Sounds like you've got things pretty well under control...

Thanks Ken.

RW

riverwalker said...

To" Ryan

You hit the nail on the head with your comment:

"As long as you spend less than you make and save the difference you will be good."

Once you get the hard part down,i.e. spending less. it gets a lot easier.

Your analogy of someone who is physically out of shape is a good reminder that you can be "financially" out of shape as well.

Being debt free makes life a lot better and a whole lot easier.

Thanks Ryan.

RW

riverwalker said...

To: Adventures in Self Reliance

Disability is a hard one to overcome and usually can't be solved quickly. It's one of those "major life events" that can change everything very drastically and seemingly overnight. this is one of those events that literally force us to make very hard and difficult choices, even if we aren't ready.

Glad you've gone beyond the panic mode in your preps and have the basics in place. This is great!

I'm glad you had family that were able to help you out.

Thanks.

RW

idahobob said...

RW,

Yup, yup and yup.

We are on the same page whith budgeting.

Bob
III

idahobob said...

Misspell with. My bad. :)

Bob
III

Mike said...

For me it's more of an issue of trying to get myself as prepped as possible for a collapse that I see coming sooner than most expect. If that happens paper money will be worthless and having saved it will mean nothing.

No I don't have my property paid for yet (which is my only real debt) but what's better, saving 200.00 this month or buying another 150 watt solar panel or ammo, or.... If TSHTF I don't expect the person I owe for my property to come knocking looking for cash that is no good anyway.

riverwalker said...

To: Mike

If the worst happens, having a piece of land that is paid for may be easier to hold onto, especially if the lien holder decides they may need it worse than you do.

A better option may be applying any savings to reducing your mortgage with the hopes of paying it off early.

Thanks Mike.

RW

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