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Bad Spending Habits And How To Break Them.

Last updated on September 30th, 2023

November 7th, 2022

Ontology Of Value Bad-Spending-Habits-Everyone-Needs-To-Break-1024x683 Bad Spending Habits And How To Break Them All Posts Self-Care & Mental Health Self-management Tools and Strategies

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SUMMARY / KEY TAKEAWAYS

  • Most of us have been stuck in this depressing rut at some point, living paycheck to paycheck. And sometimes, more than anything else, bad spending habits are responsible for the situation.

  • In this brief article, we will explore some of the most common bad spending habits that can lead to this vicious cycle, and provide tips to help you successfully break these habits.

Bad Spending Habits: Most Of Us Know Them From Autopsy.

It’s payday! Suddenly you’re elated as your balance soars out of your overdraft and bounces back to positive numbers. Then, barely a week later, you’re broke again, with no idea what you spent all your money on. 

Most of us have been stuck in this depressing rut at some point, living paycheck to paycheck. This can leave you feeling hopeless and anxious, but there are things you can do to gain confidence and clarity over your budget. In this brief article, we will explore some of the most common bad spending habits that can lead to this vicious cycle, and provide with some tips to help you successfully break these habits.

Emotionally Charged Shopping, a.k.a. Retail Therapy, Causing Our Bad Spending Habits.

It is no secret that buying things we like makes us happy. Doing so literally triggers a release of potent hormones in our brains that create a state of bliss. Shopping activates the same dopamine loop in our brains as gambling or chocolate.

Whilst there is no shame in occasionally reveling in a lovely purchase, we can sometimes fall into a habit of relying on this hit of dopamine to help us deal with difficult situations and feelings — which is a phenomenon commonly referred to as “retail therapy.”

It’s common for people to use food as a reward, whenever we go out for a nice meal to celebrate, throw an extra bar of chocolate in the trolley or “treat ourselves” to a takeaway after a hard day. But these seemingly harmless expenses can soon add up and leave you short if you don’t plan for them in your budget.

It works the same with clothing, home items, or pretty much any items that you buy spontaneously. A few extras here and there may leave you short for something essential further down the road.

The Bucket Method.

If you try to sign from all treats at a time, you will miserably fail. Instead, you need to let go and get treats once in a while or otherwise, you will easily develop the “yo-yo” effecting start buying more. 

Therefore, one efficient way to combat the “retail therapy” phenomenon — except having limitless funds — is to plan expenditures ahead. Allocate your total budget for the month, divide your planned expenditures into living costs, utilities, food, travel, education, entertainment, and set aside a small amount each month for casual treats.

This way, whenever you see something you want, you will know instantly whether you can afford it or not. This approach is also known as the “bucket method” and appreciated for its simplicity and efficiency.

Meal planning will also help, as you’ll know exactly what ingredients you need in your diet and won’t be as tempted to grab stuff “just in case” while shopping. For the same reason, as a rule of thumb, it is good to go shopping after the meal rather than with an empty stomach.

The 50-30-20 Rule.

For many people, bucketing is too complex. After all, while working with buckets, you will need to divide your money into multiple categories and manage these categories. 

The 50-30-30 rule is a “rule of thumb” in budgeting (popularized by Senator Elizabeth Warren and her daughter, Amelia Warren Tyagi, in the book “All Your Worth: The Ultimate Lifetime Money Plan”). 

According to this rule, the after-tax monthly income should be divided into three spending categories: 50% for needs, 30% for wants, and 20% for goals: savings or paying off debt.

Ontology Of Value Bad-Spending-Habits-Everyone-Needs-To-Break-1-1024x683 Bad Spending Habits And How To Break Them All Posts Self-Care & Mental Health Self-management Tools and Strategies

Buying Second-Hand Versus Buying The New.

Marketing is big business, and for a good reason. People love buying things from upmarket shops with popular branding, lush packaging and expensive price tags. But does good marketing equal good quality?

Shops use sophisticated marketing tactics to imply a greater value to their products than those in the discount store next door. But we can fall into the dangerous habit of interpreting this worth internally, using it to feed our self-esteem and perceived worth. 

That said, there is an argument to be made for buying items of higher quality over cheap imitations. Low quality items will fall apart faster and need to be replaced frequently, especially when it comes to clothing. It makes sense to spend a little more to gain long-term wear and quality, saving money in the long run.

But there are ways to buy things that will last and save you money. Waiting for sales, buying with vouchers and even buying second-hand enables you to bag that top-notch gear at a heavily discounted price. There are plenty of online platforms where people sell quality goods at a fraction of the retail value. Many of these items are unused, still in original packaging or with the retail tags on.

Conclusion: Can You Effectively Tackle Your Bad Spending Habits?

After all, for the overly manipulative marketing industry, you are the product. Therefore, however you choose to manage your money, it’s a good idea to reflect on what you buy regularly and review your budget, as well as consider why you buy the things you do in the first place.

Do you really need all these things? This self-reflection will greatly help you to break any bad spending habits before they become a serious financial problem.

More Training On Budgeting.

Do you need more training in the are of budgeting and personal finance? We can recommend the following free Coursera courses to learn more:

1. The Fundamentals of Personal Finance Specialization.

This specialization is intended for anyone looking to take control of their finances. Through five courses, you will cover a variety of personal finance topics, including budgets, investing, and managing risk.

The readings, videos, and activities will prepare you to understand the current state of your money, as well as take actions to work toward your financial goals. This specialization is geared towards learners based in the United States of America.

2. Personal & Family Financial Planning.

This course covers many critical personal financial management topics in order to help you learn prudent budgeting habits both while in school and throughout your lifetime.

Please cite as:

Ontology of Value (2022, November 7th). Bad Spending Habits And How To Break Them. Retrieved from https://ontologyofvalue.com/bad-spending-habits-and-how-to-break-them/

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