Overspending? Here are 7 ways to help cut expenses

MANILA - A quick click on the "buy" button of an online sale, a purchase of a small knickknack, or one eat-out too many--these all add up. Unplanned purchases can be excused every once in a while, but if this becomes a habit, you could fall prey to one of the more common obstacles to financial freedom: overspending.

Unfortunately, overspending can wipe out your earnings, prevent you from building a savings pot, or worse, plunge you into debt. Managing this requires taking deliberate steps to curb your desire to buy unnecessary items and services. It also comes with the realization that it’s not just the big-ticket purchases that can lead you to overspend. Small, seemingly harmless everyday purchases can also add up.

To help you rein in excessive spending, here are seven easy steps:

1. Set a fixed budget. Have a set budget for just about everything--your daily food expenses, utility costs, entertainment, and everything else. If you know that you tend to spend a lot in restaurants, having this budget will nudge you to choose those outlets with friendlier price points. For all you know, the set meal at the office canteen may turn out to be just as filling as the lunch set at that café in the corner, at just half of the cost.

2. Create shopping lists when going to the grocery or the market. Having a shopping list not only saves you time as you go around the store, it also ensures that you will only buy the things that you need. If you find this is too restricting, classify your purchases as must-haves (like meal ingredients for the week) and nice-to-haves (sweet snacks). If after the cashier rings up your must-haves, you find that still have room to buy the nice-to-haves, add them to your purchases one by one until you reach your budget cap.

3. Keep a diary of your expenses. When you follow steps 1 and 2, step 3 will be a breeze. Jotting down your expenses will let you know exactly where you are spending more than you should. Who would have thought that your morning espresso habit costs you P2,600 a month? The simple act of recording your expenses can tip you off that you are already close to breaching your monthly budget. Already spent P4,000 for your hair treatment? Then maybe the shoe purchase can be postponed to next month.

4. Live within, if not beneath, your means. Examine your lifestyle and identify patterns that cause you to overspend. Are you upgrading your smartphone just because “everybody’s doing it”? Perhaps you’ve gotten used to taking vacations abroad when you were still living with your parents, and you’ve carried this on even when you’re living on a fresh graduate’s income. Be true to your spending capacity. Identify alternative activities or products that you can afford and enjoy at the same time.

5. Use credit cards to track your spending. Credit cards are a very useful tool. It can help you manage your monthly spending and when needed, take advantage of pocket-friendly payment terms. If you have set a budget for yourself, your credit card can help you track your purchases for the month, or bridge the gap for utilities that must be paid against your tight cash flow. However, remember that your credit card limit is not additional spending money on top of your cash - always make sure you can afford the purchases you make, and pay your bill before due and in full as much as you can.

6. Don’t succumb to emotional shopping. A lot of mindless shopping happens when people are emotional--too tired, stressed, even hungry. If you’re one of these people, you may find out that your emotional outbursts are also causing a hole in your pocket. Be mindful of your emotions so that whenever you feel angry or tense, you would steer clear of retail outlets and do something else--like exercise, meditation, or plain relaxing at home.

7. Stay away from sales. Don’t lead yourself to temptation. If you can’t resist buying needless stuff, take a break from window shopping in malls, retail outlets, and even online shopping sites. "Out of sight, out of mind" is very true when it comes to shopping. Instead, find other activities to keep yourself busy. Hang out with a friend, spend an afternoon watching television or playing with your nieces and nephews, or read a good book.

When you master cutting back on expenses, the next step of building up savings will be a walk in the park. Good luck!

source: www.abs-cbnnews.com

Debt and the Holidays

A lot of people make use of their credit cards when shopping for the holiday season on the premise that they are going to pay all of the newly formed debt off within only two or three months time. Unfortunately, most people are still trying to tackle these credit card debts six to eight months later, and by then they are paying as much as 10 percent to 20 percent more because of credit card interest, making the holiday bargains much more costly in the end. This debt pattern is repeated every year for many Americans. Debt and the holidays tend to go hand in hand in this day and age, because incurring debt during the holidays is something that seems to make sense to some people, even though incurring debt for gift buying purposes is one of the worst possible things that you can do. Using credit cards for gift giving is an act that simply leads to impulse buying and overspending, along with resulting in a steep increase in debt.

A better approach to avoiding debt and the holidays is simply to save small amounts of money all throughout the year, putting together a fund specifically designed for holiday gift giving. Put together a list of people that you would like to give gifts too and how much money you can afford to spend on each one of them. This way you can plan ahead and pay cash for each purchase. As soon as the cash is done, you are done shopping.

If you find it to be difficult for you to save money all throughout the year, then consider joining a Christmas Club, which is something that many credit unions and banks still offer. You put so much money into the account a week into the account at your bank. Sometimes this money can be automatically deducted from your paycheck or regular bank account to save you the effort of doing it yourself. The account will most commonly accrue interest at the same rate as traditional savings accounts. In October, November or December the money will be transferred into your regular checking account, allowing you the necessary means to get your holiday shopping done, debt free!

Four other things that you can do to stay out of debt during the holiday season include:

- Setting spending limits. How much can you set aside reasonably every month based on your budget? Plan ahead and only put away the amount that you can actually afford.

- Putting together a list. Follow Santa's example and put together a list of people deserving of gifts including smaller gifts for teachers, babysitters, delivery people, etc. Budget ahead of time through planning and you will not end up with any unnecessary expenditures.

- Setting a limit. Decide how much to spend on each person on your list and make sure to add everything up so it doesn't exceed the spending limit that you set for yourself.

- Deciding where to shop. Comparison shop by shopping early and you can save a lot of money. If you wait until the last minute, you won't have time to shop around and may end up paying more for something that could have been purchased for much cheaper a week or two earlier.

source: richcreditdebtloan.com