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Saturday, February 19, 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!

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