In terms of personal financial health, living outside your means is a very dangerous habit to maintain. Whether that’s to keep up appearances, a love of spending or simply enjoying having the latest gadgets or fashion statements in your wardrobe, you could reach levels of debt that could come crashing down on you before you know it.
So what can you do about it? Luckily there are a number of steps you can take to get back in the black and get your spending habits or addictions under control.
Budget for the essentials
We’ve covered budgets and spending diaries in previous pieces, and they can be highly useful tools in tracking what goes in and goes out, and on what. Figure out what you’re earning and assign money to what you need first of all – rent, groceries, medical bills etc. If there’s no room for extras then so be it – having enough money for medication is more important than catching the latest match on Sky Sports.
Swiping a card is easy – you just flash your plastic and walk off with your goods, not really seeing the dip in your bank account. If you’re out shopping or on a trip, take what money you’ll need with you in cash, and you should find the physical dwindling more of a painful process.
Cut out the middle man
Establish a savings account and set up a direct debit to deduct a fixed amount each payday, perhaps between a bank and credit union accounts. It might seem like overkill, but it means you don’t have to withdraw money yourself and face the temptation to spend it. Even a small amount like €60 per week will add up – after just a year of saving this way you’ll have netted €3,120.
The big picture
On a similar vein, you need to hammer home the cumulative effect of all of your spending. You might be able to rationalise spending just €40 each week on clothing, but ask yourself if you really need it, and what effect that might have in future. €40 per week adds up to €2,080 per year, money that could be used to pay off debts, save for a car or put a down-payment on a house.