Welcome back! Today is Day 2: Spending Habits
We all handle money in different ways. An important factor to financial success it to understand how it is that you handle your money. The average person is said to make 1-2 transitions per day and approximately 47 transitions per month.
Contrary to popular opinion, not everyone picks up their money habits from childhood. Some people are born spenders, some people are born savers, and some people are born somewhere in-between. With that in mind, everyone needs to assess their spending habits in order to see where improvements can be made. You might be surprised at what you find.
Before we get started, I want to share two quick stories with you. One is a personal story, and the other one is about a friend of mine.
I’ll start with my story. Not long after my husband and I got married, we decided to track our spending habits with groceries. We discovered that in a single month, we spent $386.91 on groceries for the two of us. The problem with this was that most of our food went bad because we over purchased and couldn’t eat everything. However, it wasn’t until we tracked our spending that we realized how much money we were wasting.
My next story comes from a friend. She said that her and her husband tracked their spending for the amount of times they ate out at restaurants or got takeout/fast food. By the end of the month, they spent over $700 on eating out. $700!
Hopefully those quick stories help you realize the importance of tracking your spending. Now, let’s get to work. To start tracking your spending we will cover these areas: Per item costs, needs vs. wants, and splurging.
Let’s do this!
Per Item Costs
In yesterday’s email, you made a list of all your bills and monthly debts. It’s time to get that list and put prices next to each item.
Chances are you will realize how much money you are wasting on things that you pay for each month. Do you have a gym membership but never go? Do you have an HBO account but only watch Netflix? Are you paying for an expensive phone plan that could be cheaper with another carrier?
Get your list from yesterdays bills/debt inventory and find out how much you pay per item.
Yes. There is a difference between things you want and things you need. For example, I want eyelash extensions but I need to buy groceries. I want new clothes but I need to buy gas for my car. I want the newest iPhone but I need to save for college tuition. I want to go to an expensive restaurant but I need to pay off my credit card debt. I think you get the point.
Make a list of the things you want and the things you need. It’s important that you don’t put things on your need list that are actually wants. If you’re unsure if something is a want or a need, just ask yourself what would happen if you cut this specific purchase out of your life. If you cut it out and there is no risk of you dying, losing your job, or endangering your well-being, chances are it’s a want.
How often do you splurge? And I don’t mean buying an ice cream cone on a Friday afternoon. I mean a ‘treat yo’ self’ type of splurge. Depending on your monthly income, a splurge is a different price point for everyone. However, a splurge is still a splurge, and can really hurt your finances.
There are a few reasons we end up splurging. One reason is because we see an item we really want and decide then and there to buy it. Or, maybe we had a bad week and convinced ourselves that we deserve a shopping spree. The occasional splurge is normal. What’s bad is having no self control combined with the frequency of how often it happens.
Take a look at your purchases from the last 3-5 months and add up how many times you splurged. Then, add up the amount of money you spent in total on those splurges so that you can see how much financial damage it did.
When you have completed today’s tasks, you will have a better understanding of your spending habits. Tomorrow is all about credit card debt.
THE LIFE HUNT
My name is Alyssa Hunt and I help busy hustlers work toward their dreams of business success and financial freedom all while managing full-time jobs and daily distractions. Let’s do this!