Between constant advertising and bigger and bigger needs, knowing what to buy and how to control your spending can feel a bit overwhelming at times — but it doesn’t have to be. Good spending habits can help you break out of the paycheck-to-paycheck lifestyle and build wealth slowly over time. Here are some tips that can help get you started on the path to building good spending habits:
How to Create Good Spending Habits
Learning how to control spending can be easier if you know how, when, and why you’re currently spending money. Creating a financial diary where you record every purchase you make during the following weeks or months can lead to unexpected insights and could be an excellent way to start.
You could simply use a notebook and manually record each purchase. Budgeting software can also help with tracking, and there are free options that link to your financial accounts and automatically import transactions.
Whichever route you take, the goal is simple: For at least 30 days record everything you buy, no matter how small.
Find Patterns in Your Behavior
Start looking for trends once you have at least several weeks’ worth of data. If you’ve been diligently recording your purchases, you may already have some ideas of what triggers you to spend money. If you used budgeting software, it could also be easy to categorize and sort your purchases.
Try to identify spending or behavioral trends in the data. For example:
- Does stress or boredom lead you to overspend? Boredom and anxiety can easily lead to online shopping, especially now that we can checkout from the comfort of our couch.
- Are you likely to be rushed in the morning and wind up buying coffee or breakfast while on the go? While these small trips don’t seem like a big deal at a time, those purchases add up.
- Do you tend to sign up for free trials and then wind up with monthly subscriptions? Free trials are all over social media for a reason -- to lure us into expensive subscriptions.
- Do you frequently pay late fees because you accidentally missed a bill? Late fees can run $30 or more a month, putting a ding in your bank account and possibly even your credit score.
- Are there services you’re paying for but rarely use? With so many streaming services, subscription boxes, and monthly memberships available now, it is all too easy to sign up and forget the charge is hitting your credit card every month.
There may be others that are unique to your situation, and recognizing these unwanted spending habits could be an important step in changing them.
Look for Ways to Replace or End Unwanted Spending Habits
Once you’ve found a few patterns you’d like to break, you can look for ways to build better spending habits.
Research shows that habits are often made up of a cue, routine, and reward. For example, being stressed may be your cue, shopping online is your routine, and buying something is your reward — even if it only temporarily relieves the stress.
You may not be able to get rid of the cue altogether, but once you recognize it, you could try to replace your routine and reduce spending. For instance, rather than shopping online, you could transfer the money to a savings account and build up an emergency fund.
The growing savings account could be your reward. Plus, your new money habit can lead to building long-term wealth and reaching your savings goals. Plus, having an emergency fund could also reduce stress and improve your well-being. Win, win!
Other money-related habits might not follow the same cue, routine, and reward. As a result, you may have to change your lifestyle rather than replace the routine. Frequently buying breakfast and coffee out could be one example. Waking up earlier and preparing morning meals could help you break the habit and reduce spending.
Continue the Process
Learning how to control spending and build good financial habits can take time, and in some ways, the process never ends. You may find old habits creeping back in or develop a new habit that doesn’t align with your financial goals.
Everyone slips up occasionally, but if you regularly scrutinize how and when you spend your money, you’ll be on the right track. Over time, the good habits you instill could save you money and lead to building wealth.