Americans carry a collective total of roughly $850 billion in credit card debt, and among households that have credit card debt, the average is nearly $16,000 per household, according to the Federal Reserve. Many people find themselves resorting to using credit cards to pay medical bills and, although it’s not ideal, it is often the only thing preventing bankruptcy, especially for seniors.
Those who don’t cover medical bills with credit cards often use them just to make ends meet in this “new” economy we’ve been experiencing since 2008. Still, others are victims of their own undisciplined shopping habits.
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If you fall into the third category, you’re in the most fortunate of the three groups because you have the power to reduce your debt and manage your money better simply by rethinking your discretionary spending. Here are five ways to control spending.
Analyze need versus want.
If you aren’t able to be clear on a need versus a want, I guarantee you struggle with your finances. When you’re about to pick up that neat / cute / fabulous / useful new THING or sign up for a new service you’ll pay for monthly, stop and think. Is it something you need or just something you want? It is a desperate must-have or a nice-to-have? Becoming ruthless about where you spend your hard-earned money is the first step to taking control of your personal finances.
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Think of money as time.If you tend to spend in a cavalier fashion, try thinking not of how much money the item costs, but instead calculate how much of your life it will take to earn the money to buy it. If you want a new pair of jeans that cost $75, figure out how long it takes you to earn $75 in take-home pay (not gross pay). If you had to work those hours in exchange for the jeans right now, would they be worth the time? If not, pass on the purchase. By thinking about buying with your time rather than your money, you shift your perspective, which may help clarify your priorities.
Think about storage and maintenance.
Every single thing you own costs you something in the currency of storage space and maintenance, even if it’s just dusting it or putting it away when you’re finished with it. Before you leap into a new purchase, consider whether you have room to store it, where you’ll keep it and how much ongoing attention it will require. It may not be so attractive once you add in all those factors.
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Assess whether it’s redundant.
The worst purchase is a wasted one. Disorganized people tend to spend money over and over again on the same things because they typically can’t find what they know they own, so they buy it again. Before you purchase anything, ask yourself if you have anything else that will perform the same purpose equally well or better. Or better yet, if you already know you have the same item at home but can’t find it, let that be your motivation to declutter so you can find it, and save the money.
Sleep on it.
So let’s say you’re in love with a new sofa that costs $1,200. You really NEED a new sofa because your pets have shredded the one you have and it’s 12 years old anyway. You’re just fine with the concept of exchanging 12 hours of your work life to earn the money to buy it. You’ll certainly have a spot for it once the old sofa is gone, and of course it won’t be a redundant purchase. Now what? If you love it, and you know it will be there tomorrow, leave it behind and sleep on it. (Not the actual sofa… just the decision.) If in the next few days you find yourself wishing you had brought that sofa home, that’s a clue that you won’t regret the purchase, so go back and buy it.
