What impacts spending habits?
Each person develops their spending habits from the examples modelled for them (in their family, at school, on TV, in books or music), and from the money behaviours they prefer because of their own unique personality.
Teachers and role models
Role models like parents, older siblings, extended family, peers and schoolteachers can have a lasting impact on your spending and saving behaviour.Your primary caregivers, especially,can have a significantinfluence on your spending habits. If you were raised by more risk-averse folks, you might be less likely to overspend or take investments risks. On the otherhand,if youregularlysaw them offer gifts of money or dabble in the stock market, you might do the same.
Media and entertainment
Just like a lot of songs and storiesthatcenteraround a love interest, you’ll often find a money angle, too. Rags to riches, big spenders, lottery winners, fairy godmother-types,music, movies andTV showsall model spending and saving behaviour.
Culture and religion
The spending norms of cultures, regions and religions formindividual habits that align with those expectations. You may beencouragedto live frugally and humblywithout excessive spending, make donations toyourchurch,support your ageing family members or host large cultural and family celebrations.
Personal preferences
No two people are exactly alike. Even raised in the same family or environment, people tend to manage their money differently.Your sibling might be a free spender, while yousquirrel your money away for future purchases. Howpeopledeal with stress and emotions on a personal level impacts spending, too. Hitting “add to cart”canbe an emotional release in stressful situations.Celebrating milestones and achievements with purchases can become a way of life.Emotion-based overspendingcanoftenlead to financial problems.
5 ways to change unhealthy spending habits
Unhealthyfinancial habitscan be frustrating because theydetract fromshort- and long-termfinancialgoals.Even when yourealizeyour behaviour is working againstyouandyour goals,it can be difficult tobreak the habit.
It takes a conscious effort to changeyour spending habits. If it helps,try tothink about it as forminganew,healthyhabitrather than breaking a bad habit. Here are fiveways totransformunhealthyhabitsto help you gaincontrol over your finances.
1. Trackyourspending
You’ll only know where you’re overspending (and under-saving) if you track it. At the end of each month, are you surprised that your money is gone, and confused about where it went so quickly? Pay attention to how itfeels. Youprobably feel unsettled and frustrated by what seems like a lack of control.
Use a tracking method that works best for youto spend wisely:amoney managementapp, pen and paper, a simple spreadsheet, a visual spending board, aphotoof your receiptorascreen shot of youronlinepurchase all work.Reviewing when and where you tend to spend and what you spend your money onmakes it easier to make spending decisions in the future.
2. Avoid overspending on conveniences
Choosing upgrades like delivery over pick–up, expedited shippingandname brands over store brandsalmost alwayscome at ahighercost. If you’re tracking your purchases, you can easily see where and how much you’re spending onconvenience.You mayexperience a bit of extra joy from the luxury of those little extras, but that can be a fleeting emotion.And your long-term goals will stay out of reach if you’re overspending on non-essentials that could bedownsized oreliminatedaltogether.
Make a list of your long-term goals andreviewthem regularly. Label a new savings account to reflect a big goal, like an emergency fund,avehicle,yourretirement orahomerenovation. Ifgiving up a convenience leaves you feelingdisappointed, consider transferringthe amount you would have spent onthat “extra”directly to your savings account. It might be a small impact, but it all adds up.
3. Acknowledge your emotionalspending
Most people would admit they’ve made a purchase to either avoid negative situations or stress, or to celebrate the good. The immediate actor impulseof buying somethingnew canactivate those feel-good hormones like dopamine. Companies and marketing firms spend a lot of money and time finding ways to engage customers bytriggering those responses in consumers. But the eventual stress oftoo muchdebt ortoo littlesavings decreases happiness and increases stressand guilt.
Emotional spendingcanalso serve asa coping mechanismfor surviving challenging times. Try creating a list ofhealthycoping mechanismsthat won’t negatively impactyour finances,likeexercise,connecting with friends or family,pursuing a hobbyor pitching in to help someonein need.
4. Create a budget and a plan
Abudget can be eye-opening.Necessary expenses like a mortgage, utilities, transportation, food,acellphoneandloan paymentscandemanda large portion of your monthly income.Abudgethelpstoensure youcan pay foryour essentialneeds andreveals what’s left for financial goals and non-essentials.
Would you like to purchaseahomein five years?Boost your emergency savings?Save for your kids’post-secondary tuition?Helpyouragingparents? Short- and long-term goals require a plan.Sodo your day-to-day comforts and non-essentials, like subscriptions, personal care appointmentsandspecialty coffees. Make as many budget lines as youwant andprioritize however it suits your financial goals.
5. Make paying off your debt a priority
There’s one guarantee when it comes to finances: debt will not take care of itself. It can be tempting to make only minimum payments on credit cards or lines of credit, or to skip a payment altogether so that you have money to spend elsewhere. Unfortunately, over time your credit score will be negatively impacted, and it will take you much longer to pay off your debts. The longer you hold onto debt, the more you’ll pay in interest charges. Check out this debt calculator to understand how long it will take you to get out of debt.
Try to habitually charge onlywhat you can pay off in full in one to two payments.Setting up auto payments or creatinga schedule with reminders to make your payments on timecan help.
Everyone has spending habits. Some of them are less helpful than others, but you can create positive financial habits that will help knock out the ones that aren’t benefiting your financial health or future goals. If you aren’t sure where to start, and need advice on budgeting or debt repayment — or if you’re overwhelmed by your current debt and want to learn more about your debt relief options – reach out to a Licensed Insolvency Trustee (LIT) for a free consultation. Make today the day you begin to create good spending habits.
If you want to transform your bad spending habits into good ones, meet with a Licensed Insolvency Trustee today to create a plan.
