Overspending can be an underrated problem. People who consistently spend above their income will be in serious financial trouble eventually. They will end up either with no money, in debt beyond their capacity to recover, or both. To stay solvent financially, you have to develop the habit of never spending money that you do not have.
Establish a budget before you receive your first paycheck.
Budgets are the bane of those who overspend. A budget cramps their style. For those who want to build an estate or wealth, a budget is their best friend. By setting up a budget before your first paycheck, you can raise the odds against spending more than you earn. Your budget designates every anticipated penny for a purpose. Part of your income should always go toward saving or investing.
Have money directly deposited into a savings account.
It helps if you have money saved from your check before you can see it. If you are unable to keep your hands off of your savings account, increase the amount of taxes that are withheld. You will not see this money again until after you file your taxes next spring. It may be a little painful at first, but with some work you should be able to adjust to the reduced amount.
Put yourself on an allowance.
Try not to consider everything in your checking account as available cash for spending. Designate an amount each pay period for your person spending that is not for groceries or paying bills. When it is gone, stop spending. Get it in cash when you go to the bank and make sure it is a reasonable amount.
Learn to constantly look for ways to cut expenses and increase income.
Everyone wants to do this. The problem is that most people lack the discipline to stick with it. If you can develop the habit of always looking for an opportunity to save money or pick up an extra dollar or two, you should be able to keep your income above your expenses each month.
Avoid all impulse spending.
Impulse spending is a budget killer. A dollar here, ten dollars there, and soon you will have spent a pile of money that you could not afford. Allowances can help this, but they do not prevent impulse spending. If it is not in the budget, put it in next month’s budget and do not buy it until then.
Do not buy on credit.
Buying on credit is spending money that you do not have. Yes, there are times when you use a credit card for convenience and pay it off with cash at the end of the month. This is risky. You may misjudge your amount of free money and find that you cannot pay the bill entirely at month end. Now, you have just taken this month’s spending problem and made it into a spending problem for two months. Avoid credit spending.
Consider shopping thrift stores for needed items before going to retail stores.
Used is a word that many people find repugnant. They may buy a used car if it is called pre-owned. The reality is that you can frequently find items that are in excellent condition for pennies on the dollar of what a new item costs. You can always buy it retail if you cannot locate a used item. If you make a habit of frequenting a couple of good thrift stores, you may find yourself saving hundreds of dollars
Make things you already have go farther and last longer.
Do not rush to replace or throw away things that still have some value. Squeeze every dime of benefit from existing items. By taking this approach with everything you own or use, you will be assured of getting as much value for you dollars as possible.
Delay as many purchases as you can until late in the month or pay cycle.
If you can live without an item for a few days longer, do it. You may find in some cases that you do not actually need the item. By delaying spending, it is less likely that something more important will need to be purchased after you have spent the money. You also have a reduced chance of more opportunities to make additional purchases when there is less time remaining.