Learning to separate wants from needs can be tricky. There can be times when we want something so badly, we feel like we need it. Such is the power of desire. However, giving in to impulse can lead to accumulating needless debt, which locks us into paying interest
on money we should never have borrowed. And, while debt relief programs can be useful for getting debt under control, avoiding the trap of unnecessary spending is an even more effective way to deal with debt.
What is Unnecessary Spending?
Taking on expenses, contracting services, or making purchases that do not serve a necessity—or help further your financial goals — is unnecessary spending. Simply put, it’s the cost of anything you can do without. Subscriptions we don’t use, going out for meals all the time, buying things on impulse and paying more for luxury items, all fall under this heading. Granted, these things have the potential to add joy to our lives, and we’re certainly not saying you shouldn’t have a happy life. However, overindulging in these areas, particularly at the expense of saving and investing for your future needs, will create problems.
How to Avoid Unnecessary Spending
1. Establish Long Term Financial Goals – Having something to aim for makes things easier to do. Planning for retirement, saving for a vacation, building a college fund for your kids— these are worthy long-term goals. Once you have an idea of how much money you’ll need to accomplish these things, you’ll be able to figure out how much you need to put away — and how often you need to put it away— to get there. This is the first step toward creating a budget.
2. Create a Budget – Develop a spending plan that takes into consideration all your needs, current and future while leaving you with a bit of fun money. Start by tracking your expenses for a month to get an idea of where your money is currently going. Keep receipts, log them into a ledger, on a spreadsheet, or in an expense tracking app. Once you have the list, look for costs you can eliminate and still live comfortably. Construct a budget based on those findings and you’ll have a solid first step toward cutting unnecessary spending out of your life.
3. Establish an Emergency Fund – Most experts recommend setting aside enough cash to cover at least six months of your core expenses. This will come in handy should you lose your job or encounter a large, unexpected expense. Having an emergency fund to cover you can help you avoid going into debt—or limit the amount of debt you have to take on — in such a circumstance.
4. Think Before You Spend – We live in a society in which we are bombarded with “buy” messages at every turn. In fact an entire industry, advertising, exists for
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that purpose. This is why shopping intentionally is so important. Make a list of the items you need to purchase and stick to it when you go shopping. This helps you avoid getting sidetracked by bright and shiny temptations.
5. Implement a Cooling-Off Period – When you find yourself tempted to make a purchase for which you have not budgeted, ask yourself, “Is this something I really need, or do I just want it because it looks cool?” Give yourself a week or two before making the purchase to see if that desire grows or diminishes. This gives you time to see if the item will serve an ongoing purpose in your life or if it’s something you’ll use for a little while and leave to gather dust.
6. Pay Cash – Shopping with cash helps you see the true cost of the things you buy. There’s a difference between counting out bills and coins to pay for a purchase and presenting a piece of plastic. Credit cards give the illusion of having more money than you ought to be spending. This makes it easier to justify buying things you don’t need.
7. Silence the Hounds – Unsubscribe from emails, newsletters and notifications from retailers. Their promises to save you money are, more often than not, actually enticements to spend more money. Often on things you don’t really need.
8. Look for Ways to Save Money – That five-dollar cup of coffee you buy on the way to work every morning is really costing you $1,250 a year — assuming you take a two-week vacation annually. But it goes deeper than that. Invested, that money will grow over time, which means that cup of coffee is far more expensive than it seems. Buy a thermos and make your coffee at home. Similarly, instead of eating out all the time, cook your meals at home. Buying generic items, instead of name-brand items can also help you save.
Avoid “Opportunities to Spave”
“Spaving” is spending more to achieve extra savings. For example, buy one get one free isn’t a deal, if you wouldn’t have bought one in the first place. Similarly, online retailers often try to goad you into larger outlays with “spend more and get free shipping” offers. Granted, there are situations in which savings can be had by doing so. But think it thorough before spending $75 to get free shipping when the item you need only costs $25.
The Benefits of Avoiding Unnecessary Spending
Incorporating these ideas into your spending will give you more money to use to invest in your future self. Saving for a home, living debt free and investing for your retirement all become easier when you get away from unnecessary spending. Plus, your life will be more free of clutter.
