Set wealth creation goals
Think of it this way – when you allocate a portion of your monthly income to something, you’re going to disregard that portion entirely when you think of spending money on something.
It’s like wedlock, but with money.
Let’s say you make $1000 a month. Now compute the amount of money you need for necessities – i.e. food, rent, clothing, and of course – the internet.
Let’s say this comes to $250. Add 30% to this for any extravagant dinners and another 30% as a margin. That comes to $250 + $75 + $75 = $400.
You’re now left with $600 every month after your basic living expenses plus a little extra for outings. What do you do with this? Well, some of it goes to your insurance premium. The rest of it? Invest it!
Invest it in diverse investment options (speak to your adviser).
This way, you give yourself the living expense plus a little extra to splurge, but you’re planning your spending so you don’t overspend. What’s more, few years of investing with such discipline will build you a lot of wealth – so that’s an added benefit.
Think about your spends in terms of hours
Let’s for example assume that you make $15 an hour. You’re thinking about buying a recliner that’s priced at $150.
To buy this recliner, you’ve had to work for 10 hours! If you factor in taxes, this number might go up even further to 12 hours.
Now, if you really need the recliner, go for it. But if it’s something you don’t really need, and were allured by just because of a fancy ad – think again!
Looking at it this way may make this purchase much less appealing to you in cases where you don’t really need something.
Walk around with minimal cash
If you believe you’re super vulnerable to the desire to spend, just walk around with enough cash for emergencies + whatever you’re supposed to spend when you go out.
If you’re out buying $30 worth of groceries, keep the $30 and plus some amount to get you out of any emergencies. Also, don’t cheat and use your credit card for impulse purchases!
Borrow rather than buying
If you love a bracelet that you saw your friend wearing at last week’s pool party, don’t immediately go online searching for the bracelet. Especially if you plan on wearing the bracelet only on special occasions.
If you’re close with your friend, she’d be more than happy to lend you the bracelet. Why would you want to put in hundreds of dollars into something you’ll be wearing only twice or thrice a year? Borrow and lend, and you’ll spend much less.
Commit to a cooling off period
Impulse buys are almost always unnecessary. When you walk by a store and look at the fancy jacket through the window – you want it and you want it now.
Instead, reason with yourself. Tell yourself, if you still want the jacket the next day you can always come get it.
May be when you’ve had some time to think about it, you’ll realize that you already have enough jackets to last for a lifetime and you absolutely don’t need another one.
