Solutions to Make Better Decisions with Your Money

7 Personal Spending Pitfalls and How to Avoid Them

7 Personal Spending Pitfalls and How to Avoid Them - TaxACT

When it comes to controlling spending, sometimes everything seems to be working against us. There are so many ways to spend money – and so many reasons it’s difficult not to.

It’s possible to take control of your spending, however. Many people have done it.

Take a look at these personal spending pitfalls and how you can avoid them:

Nickeled and dimed to death

Problem: Little expenditures add up.

Some people seem to leave a trail of money behind them throughout the day, starting with a latte or two in the morning, a magazine and mints at noon, and takeout in the evening.

If you have a good cafeteria at your job, you easily spend $10 or more without even leaving work. That’s hundreds of dollars a month but it never seems like you’re really spending much.

Solution: Give yourself an allowance for “walking around”.

Consider putting the amount you want to spend for the month in an envelope or special wallet, and when it’s gone, it’s gone.

Stop using your debit or credit card for minor purchases. You’re more likely to notice how much you’re spending if you hand over actual cash.

Spending to impress

Problem: You’re trying to keep up with your friends who are big spenders.

They drop brand names like other people drop names, and they consider themselves to be upper class consumers – even if they can’t really afford it. You’re going broke trying to keep up.

Solution: Get new friends.

That may be drastic, but at least you can try to make some well-grounded friends who don’t make you feel like the “poor friend” if you spend less than $500 on a purse.

Another solution is to simply be honest with your friends. Admit that you can’t afford lunch at that cutting edge restaurant. Chances are, you’re not the only one who would be relieved if the group went someplace more reasonable.

Murphy did it

Problem: According to Murphy’s Law, everything that can go wrong, will.

The car breaks down, you get a speeding ticket, and your cell phone dies – all in one month. What good is a budget when you have to spend money on unexpected expenses?

Solution: Expect the unexpected.

There’s no way most people can pay big unexpected expenses out of their monthly budgets. That doesn’t mean it’s no use making a budget.

Create an emergency fund just for these types of expenses, so they don’t ruin your spending plan every time they happen.

Not every “emergency” requires an immediate financial fix. Unless you’re an outside salesman, you may be able to get away without a cellphone until you can afford a new one.

You may be able to borrow a tool or appliance, or get along without it.

Repetitive charges

Problem: You’ve signed up for Internet services, magazine subscriptions, and other ongoing services.

Sometimes you only intend to use the trial subscription, but you forget to cancel so it’s still on your credit card statement a year later. Other repetitive charges don’t seem very big, until you consider how much they add up over months and years.

Solution: Make a list of your monthly and other periodic charges.

It can be a wake-up call just to see how many things you pay for month after month. Immediately cancel anything you don’t use, and try to limit the number of things you pay for every month.

Maintain your list of subscriptions from now on. And be sure to read your credit card statement every month.

Major purchases

Problem: You pinch pennies all month, but you own more house or car than you can afford. You’re in trouble before you start.

Solution: Never, ever spend the amount of money that a salesperson or lender says you can afford.

The amount they usually say you “qualify” to spend is often far too much. Make your own budget, and stick to it. Tweet this

7 Personal Spending Pitfalls and How to Avoid Them - TaxACT

When you buy a car, the surest way to avoid overspending is to pay cash. If you’re looking at payment amounts, it’s easy to spend five or ten thousand dollars more on a car than you intended to.

So, save up and buy a used car, then start saving for a better one, if you want.

The difference between a comfortable budget and a perpetually stretched one is often whether you have car payments.

Irresistible sales

Problem: When people are raised to be thrifty and save money, that thriftiness may actually make them susceptible to overspending.

A sale can seem like such a good deal, so they buy things they don’t need, or more than they’ll ever use. Sound familiar?

Solution: Don’t forgo sales altogether.

When canned goods are on sale, buying extra is smart. Before you buy anything on sale, however, ask yourself if you would buy it if it weren’t on sale.

At the grocery store, the best deals on food seldom go on sale. If the primary appeal for an item is the low price, consider passing it by.

Emotional spending

Problem: You stay on a spending plan until you’re working too many hours or your nerves are frazzled.

Then perhaps you treat yourself to something that makes you feel better temporarily – at least until you get the bill. For some people, the problem is even more serious.

When the going gets rough, they can’t always remember what they bought during an emotional spending spree.

Solution: Remember that overspending won’t solve your problems.

It will only make them worse. Pamper yourself in ways that don’t sabotage your financial goals. Time spent on relationships is infinitely more rewarding than buying things.

Consider calling a friend, or visiting someone.

If your emotional spending is a serious, ongoing problem, consider getting help. Debtors Anonymous has helped many people trying to recover from compulsive overspending.

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Photo Credit: chrisschoenbohm

About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.