2018 is coming to an end. If your finances need a healthy revamp, here are some ideas that will get you on the right track for 2019!
If you’ve recognized that your finances need a healthy revamp, we’re here to share some ideas that will be sure to get you on the right track for 2019!
Here are some healthy (and easy) habits to get you on track and in control of your finances in the upcoming year. Full disclaimer, it takes time to develop good financial habits, but it is possible and worth the effort. So, if you follow these for one week and then stop, you will go right back to square one.
First things first. You need to understand that everything that happens in your life is not necessarily an emergency, and consistently taking money out of your savings account to cover your spending is not a healthy habit. Second, you need to understand the source of why you’re overspending. Let’s take a deeper look at some things you can start doing today to not only find that source but also understand why you’re adopting that behavior.
Understand your spending triggers
More often than not we don’t realize that there are internal and external factors that make us do things. Think for a moment about the times when you have purchased that item you didn’t need, but that you saw someone wearing on Instagram and you felt like you MUST have it. How did you feel when you saw it? Where were you when you clicked “shop now”? When did you decide you needed to buy “that”?
Think about the emotions you feel when you get into that situation, and when you actually make the purchase. Not always, but sometimes when we feel distress, anxiety, or boredom we tend to try to cover those emotions with external factors that will offer us instant gratification to make us feel a little better. It could be financial distress of knowing that you can’t afford a purchase but you buy it anyway because you still have $1000 dollars available on the credit card, and all of a sudden you feel empowered that you think you can and that you’ll figure out how to pay for it next month.
Think about where you were located when that purchase happened. Most likely if you’re at work during the day, you will defer the purchase to a later time when you get home and are in comfort, so you can “experience” the purchase fully.
Understand your triggers, own them, and control them. This simple exercise of going through some of the questions above and acknowledging those situations will help you realize when you’re actually being controlled by your triggers, instead of you controlling them.
Track your spending
It’s very easy to forget as the month goes by. If you’re able to give yourself a snapshot of your spending at the week’s end to understand how much you spent eating out, shopping, or decorating that new living room, you will come to realize that you spend a lot more than you think.
Small purchases add up, but they’re easy to miss. If you’re the person taking that coffee break and spending $4 on coffee every morning that can translate to $124 a month! It’s not just coffee though, if you play the lottery, if you have a monthly subscription to an entertainment service, dining out a few times a week, you could be easily spending over $350. The problem is that sometimes we don’t see those small expenses as a big deal because we see them as individual spends in a day, and we usually just consider big ticket items “big spending.”
Tracking your spending is not about getting rid of things you love and give you gratification. It’s about being aware of where your money is going, so you can make conscious decisions of where to allocate your money better. Doing this should be seamless, most banks already have a tool built-in that allows you to track your spending.
Seriously, leave them at home, or - if you want to be more extreme because you’re obsessed with swiping them - go ahead and shred them. If you don’t have it, you can’t use it, even if you feel the urge to do so. We know how that sounds, but it’s so true. Breaking bad financial habits is extremely difficult, and sometimes you need to go to extremes if you’re really committed to getting on a healthy path. So, in order to steer you in the right track, we recommend you avoid using credit cards. Not forever, but until you build the right foundational elements to handle them correctly.
Despite the benefits associated with a credit card, if you already possess bad spending habits you will most likely fall into debt (or more debt). In this scenario, the cost of debt defeats any said benefits associated with the credit cards. Credit cards are extremely easy to use, often times we have more credit in them than what we make in a month (by far) and it’s really easy to lose track of how things are adding up at the end of the month. Most people spend money they don’t have because they’re emotional spenders, which often times results in a lot of impulse purchases. Always ask yourself the following questions: Does this item I’m about to purchase brings me true value? Am I looking forward to the instant gratification, or is this a conscious spending I won’t regret later?
Being more conscious about what you spend on is important and that begins with setting some financial goals and understanding what’s truly valuable to you. If you want that designer purse, allocate the money to it, so when you buy it you don’t feel guilty since you’re not financing it or getting into debt to own it.
Just like you get a “stipend” when you’re traveling for work, you can start building a daily spending allowance that you can hold yourself accountable to, and stick to. It sounds funny but separating your “fun” money from your bills, or other commitments you may have as soon as that paycheck comes in, is extremely important.
We recommend you set up a separate account for your “daily” allowance funds. It will give you peace of mind to know that what you have in there is what you can spend “guilt-free”, in addition to the fact that your bills will be ready to be paid from the “bills account” as soon as they come in.
The “allowance” is not meant to make you feel like you’re broke or unhappy, on the contrary, it will help you spend right for what you need, and planning for your gratification accordingly without the headache of fearing that you may have an overdraft when that mortgage bill is deducted.
Some financial discipline and organization can go a long way!
Every single day you need to wake up, set your intention for the day and think about how you can get closer to accomplishing the goals you have set for yourself with the actions you will pursue during that day.
You need to have your goals clearly defined, written down, with a timeline, and visible for yourself every day. When you wake up, you must see them - it’s the only way to hold yourself accountable for your lack of action, or for your strong commitment towards your goal.
Financial habits can be an intimidating concept. It is often times used by many, but truly understood by few.
A survey conducted by the American Psychiatric Association in 2018 reported that this year’s anxiety score kept increasing, and that the greatest increase since the previous year was around paying bills.
"Nearly three-quarters of women, nearly three-quarters of young adults (18 – 34) and nearly four in five Hispanic adults are somewhat or extremely anxious about paying their bills."
We’re human beings who don’t know it all, with different strengths and skill sets. There’s absolutely no harm in having a financial mentor who can help you set a strong foundation for financial success. No matter what you believe, the truth is, if your finances are not in order, you will not only feel stressed out, but sooner or later you will need to get them organized and on track, to be able to advance and move forward, whether it’s personally or professionally.
Don’t be afraid to ask for help. Being financially healthy is a balancing act as it requires being able to properly manage your day-to-day financial life, and meeting your financial goals, among other things. In order to achieve financial well-being you should develop and follow a spend plan that allows you to manage your money on a daily basis, stress-free. This means you can actually enjoy yourself, by simply being more conscious about your daily spending habits in order to ensure you’re always ahead and progressing toward your goals.