5 Ways to Get a Grip on Spending

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get a grip on spendingWe buy sale items haphazardly, we throw away uneaten food, we don’t use those gym memberships, and we might even waste a few dollars on lottery tickets. We spend money like crazy and are left wondering where it all went at the end of the month. After working so hard for our cash, it should make you absolutely sick when your account continually drops down near zero. If you’re ready to get a grip on spending, take note of the five tips below.

5 Ways to Get a Grip on Spending

After much thought and research, I have discovered that there are five solid ways to get a grip on spending. And I’m talking for-real tips, not stupid stuff like “freeze your credit cards” or “leave your money in the car when you shop”. These are temporary fixes and will likely not help you in the long run. Instead, let’s look at the deep-down emotional changes. If you can understand and implement these, your spending will not only go down initially, but it will stay down for life. Let’s get a grip on spending and start padding your bank account like you’ve always wanted to do.

1) Understanding Needs vs. Wants

For whatever reason, there is a massive gray area today between wants and needs. Do you need a cell phone? Do you need a $10,000+ car? Do you need a three bedroom house since you have two kids? We all want to justify our expenses, so we call them needs, but let’s get one thing straight. There really is no gray area here.

Our needs in life are:

  • water
  • food
  • shelter
  • clothing

That’s it. For most of us, water is readily available and is quite inexpensive. Food can be grown or purchased from the local discount grocery store, shelter could be as simple as a 100 square foot space to sleep, and clothing can be purchased for $1.00 per item at Goodwill, Salvation Army, or a Community Action House. Needs are essentials that keep us alive. A cell phone is not a need, a $10,000 car is not a need, and a three bedroom mansion is not a need. Almost every item that we purchase today would not be considered a need.

Want to get a grip on spending? Classify needs as they should be and your perspective on your purchases will change forever.

get a grip on spending2) View Purchases in Hours, Not Dollars

As we climb the career ladder and establish ourselves in life, certain sums of money that used to sound like millions suddenly don’t affect us in the same way anymore. For instance, when you were 15 years old and had a total of $100 in your bank account, spending $50 would have been a monumental decision. Now that you’ve got  a solid job and are used to spending thousands of dollars each month on the mortgage, your car, and food, spending $50 doesn’t seem like a big of a deal. But, if you never have money at the end of the month, then that $50 is probably a bigger deal than you think.

Instead of thinking about an expense as “only $50”, try to think about your expenses differently. For instance, how many hours would it take you to earn that object you’re thinking about buying? If you earn $20 an hour, how long would it take you to muster up that $50? Some of you would quickly answer with the response of 2.5 hours, which would be correct if we didn’t have to pay income tax, but alas, we owe the government about 30% of our earnings. At $20 an hour, it would take you about four hours to fund that $50 purchase. Suddenly, that dress or piece of stereo equipment isn’t quite as easy to buy.

3) Don’t Buy, Borrow

We Americans love our stuff. If we need something, we go buy it. It’s quick and easy, but do we really need to? Rarely.

This past weekend, I decided that I would tackle a few projects in the yard. Liz started her garden and my main task was to trim a bunch of dead branches off the unruly bush in the backyard. The only tool I had that would accomplish this: a handsaw. It would do the job, but it would probably take me 20 years to remove all of those branches.

My solution could have been to drive off to the hardware store, buy a tree branch loppers for $40, and then start hacking away, but that’s 40 bucks! And, I probably wouldn’t use this tool for another two years either! So yeah, I don’t think so. It was time to seek out a tool to borrow.

It just so happened that my Dad had the exact tool I needed. I waited a couple of days for him to locate it, I picked it up on my way home from work, and started lopping those branches the next day. It worked beautifully and didn’t cost me a thing. Plus, it gave me a reason to chat with my parents! In all areas, borrowing this tool was a win.

Get a grip on spending and think about borrowing instead of buying.

get a grip on spending4) Start Learning, and Keep Learning

If you really want to get a grip on spending, then you need to start learning about personal finance to gain some knowledge about your strengths and weaknesses. The actual learning is really quite simple since personal finance is quite basic (you know, spend less, earn more, invest a lot…). The challenge is actually taking the steps to start learning. In other words, actually going to the library to rent books or CDs on the topic. But, unlike what many will tell you, getting a grip on your spending is not as simple as changing one area of your life. To be truly effective, you’ll have to learn continually about many different facets of your financial mind.

5) Become Vulnerable and Admit You Were Wrong

One of the biggest reasons people can’t get a grip on spending has to do largely with their assuredness (or lack thereof) in themselves. Almost all of us want to look good, and we certainly want to be envied by all of our friends. But what if we accomplished this without truly earning it? What if we wear the expensive suits, drive that sporty car, and own that beautiful house on the lake, but have funded all of it on credit? Since you really didn’t have the means to buy these things and bought them on credit, those payments are now starting to kill your financial future. You don’t have money to beef up your savings or invest in your retirement, and you are liable to age into an old, flat broke individual. That is, unless you change your ways.

This is the kicker. You have many working years ahead of you, and you could grow quite wealthy, but in order to do so you’ll need to curb your spending, sell that sports car, and maybe even downsize into a more reasonably priced domicile. These actions would reduce your expenses, beef up your cash flow, and your future would certainly be bright. BUT, this often doesn’t happen. Do you know why? Because then everyone would know that you never really had the money that you lead them to believe you did.

If you truly want to be wealthy, you must be vulnerable in your finances. Downsizing might be necessary and your co-workers might discover that you’re trying to live more frugally, but you know what? Who cares? If they poke fun at you, then just smirk right back, because you know that you’re going to come out on top. If they continue to drive their overpriced cars and live in their ridiculous home, then they’ll be broke and will be asking YOU for money later in life.

Are you ready to get a grip on spending? Where do you struggle when it comes to spending money?

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Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

8 Comments

  1. Yes yes yes. I grind my teeth when people say they Need something.

    I was listening to one of my neighboors complain about how they could barely afford their student loan payments as they where assembling their new 400$ BBQ that they “needed”.

    Wake up people
    Mr. SelfReliance recently posted..TFSA limit whiners

    • Ha, yikes. In that scenario, I don’t think I would be able to hold myself back…. Although, nobody wants to make enemies of their neighbors, so maybe I would keep my lips zipped. Ha, I’ll let you know the outcome when it happens to me. 😉

  2. Sometimes it goes beyond just want vs needs….sometimes we will make purchases that are purely wants – and that’s OK. BUT, in those instances I like to apply the “Value test.” For the price of the item…..will the item bring me an amount of enjoyment that is worth giving up the purchase price worth of my hard earned cash. If not, it stays on the shelf!

    • Great point Travis. It’s definitely okay to purchase wants, but we need to first understand that they are wants and not needs, and then have the willpower to leave them on the shelf once in a while.

  3. Great content – I’m an impulsive buyer which makes it difficult to control “want and need” factor.

    • Glad my article could help you our Preeti! Thanks for stopping by!


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