After my last article, Saving Money, posted I received many questions that all boil down to something like this: “How do I save money when there is nothing left after I pay my bills?” That is a great question.
My recommendation is to take a look at what you are spending your money on.
Concept #1: Determine the difference between a need and a want. A need is essential to your existence (shelter, food, and clothing are examples). On the other hand, a want is an item you desire. Some items are easy to classify — a roof over your head (need), food (need) — but then we get into items that are a little more challenging.
How would you classify a shirt? The shirt itself would be a need. But, an Abercrombie & Fitch graphic tee would be a want. How about another item?
Try a cell phone. This item may be a need for most now that landlines in homes are a thing of the past. The want would be the latest iPhone 7 plus — the need could be satisfied with a basic cell phone.
Concept #2: Emotions can overrule our logical brains while we are shopping. “Oooh, this nail polish will make me happy!” How about peer pressure? “My friends have this cell phone — I need it so I fit in.” How about status? “I need to drive this type of car because it shows that I have money.” Watch out for these purchases, they can really eat away at your income and could create debt.
Concept #3: Impulse purchases are items purchased without planning ahead.
“The fact of the matter is that your unconscious mind is often driving your behavior as a consumer: under the influence of basic evolutionary drives and the tactics of retailers, it’s easy to feel compelled to buy something that later doesn’t find a place in your life.” – Philip Graves, Psychology Today
How do you plan for this? Slow down. Put some time between spotting an item “you MUST have” and making the purchase. This time will allow you to ask yourself questions like: Do I really need this item? What will I use it for? When will I use it? Is this the best price?
Concept #4: Make a commitment to yourself to save a specific amount from each paycheck. This is my favorite and possibly the most difficult to accomplish.
“Do not save what is left after spending, but spend what is left after saving.” -Warren Buffett
Practicing the concepts above will help you prioritize your goal of saving.
How do you get started? It’s easy! Keep a log of all of the money you spend in a month. Where was the purchase and how much was it? What were your emotions while shopping? Did you impulse buy an item?
Remember: This is a learning process so, please, no harsh judgments if you made a purchase impulsively or chose a want over a need. It will come more easily with practice. The more visible your purchasing behavior becomes, the better you will be at making different choices moving forward.
“The road of life twists and turns and no two directions are ever the same. Yet our lessons come from the journey, not the destination.” Don Williams, Jr.
About the Author: Heather BROCK-HEARN is one of Your Monthly Mentors, a Teen Money Coach who works with teens, young adults, and parents to help them become the masters of their financial destinies. With more than twelve years as a finance leader with the largest non-profit yoga retreat center in the US under her belt, her knowledge of finance is diverse and extensive. Read More…