Bad Spending Habits And How To Break Them.

November 7th 2022

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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.

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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 Skillshare and Coursera courses to learn more:

1. Modern Money Habits: 5 Steps to Build the Life You Want.

The key to unlocking a life you love? Taking control of your personal finances! In this class, Justin Bridges shares the simple five step approach that allowed him to leave a career on Wall Street to launch a successful photography business. 

Packed with the actionable tips and straightforward examples that have made Justin’s photo classes a hit with more than 80 000 Skillshare students, this 70-minute class will guide you through every step of creating a personalized plan to take charge of your financial destiny.

2. Financial Freedom With Minimalism: Identify What Matters & Create A Budget.

This class is dedicated to finding financial freedom through minimalism. The class was built by a nomad traveling around North America for over 6 years.

3. How to Budget: Make Budgeting a Day at the Beach.

There is one word which strikes fear into the hearts and minds of most people. They tremble and shake whenever it’s mentioned or even hinted at. Budgeting. But it doesn’t need to be this way! At this class, you will learn how to make budgeting fun and easy.

4. 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.

5. 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.

Are you planning to upgrade your career to the next level or change your career path? Are you pondering your options? Don’t be alone in the process – join us at our live online Ontology of Value® Career Mastery Program!

At this intensive online training, you will focus on discovering your identity as a professional, and learn effective career development strategies for landing great jobs.

We will help you choose the right career path, assist you in landing your new job, and teach you self-navigation strategies that will guarantee your success in professional development, and serve you for a lifetime!

Please find all the information about our incoming, game-changing program here:

Please cite as:

Bielczyk, N. (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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Disclaimer:

We partner with multiple quality brands via the Impact Marketplace. The links to some of the educational materials and other services recommended in this article are affiliate links.

This is educational material. None of the information introduced in this article in a financial advice.

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