4 BASICS TO PREVENT OVERSPENDING & START BUILDING WEALTH
- Jan 14, 2017
- 5 min read
America has a big problem and a large percentage of the U.S. population plays a significant role. It's called OVERSPENDING and it is wreaking havoc everywhere and leaving us all broke, from the White House to our houses. As the years go by this issue remains a continuous problem that is taking advantage of us all. We are smooth talked by all of the sales papers and advertisements, holiday and birthday obligations, special discount days like 'Black Friday', the list goes on. Those enticing sales lead to spontaneous and unplanned shopping. This creates a confusing look upon our faces once we view our bank accounts at the end of it all. As a result, statistics show that the average american is spending $1.33 per $1.00 earned. Check out the infographic below showing more results from research:
Thankfully, there seems to always to be a proposed solution to help with all of our financial woes. I have come up with 4 ways to prevent overspending and start building wealth. These tips are not required to stop overspending, but they will surely help.
CASH ONLY
Using cash only will surely make a significant change in the overspending prevention effort. During our first weekly budget meeting in October, Jasmine and I noticed that in the month of September 2016 we spent nearly $500.00 on dining out at restaurants. That's when we had enough and decided to put an end to using our debit card to dine out. Now we only use cash for restaurant purchases based on an assigned budget amount. Along with our dine-out budget item we've included fuel and groceries as a weekly cash only category. Additionally, we use cash if we plan for a night out with friends and/or family.
This is one of the major practices that Dave Ramsey pleads with listeners to implement via his envelope system. This system comes with literal envelopes that you can label and fill with the amount of cash designated for that label. Well, big envelopes were too much for me to carry around, so we created our own method. My wife and I have our own 'spinoff' of the envelope system below. We call it 'Cash Traffic Control' (see what we did there? lol). We use this faithfully EVERY week. We came up with corny reasons for the colors to help determine what each cash bundle means. For example, red was picked for resturants because we need to STOP eating out. Corny, yea, but it gets the job done. (lol)
One final reason for the cash only method is because the money is gone instantly. Many times when balancing our finances, debit card transactions take days to show up in our accounts and we forget about those transactions. This creates mistakes that hurt so badly. Because of this and the cash categories we chose, we rarely use our debit cards, which is turning out to be a great decision.
BUDGET
Budgeting is the foundation of this passion I have for financial literacy. It also happens to be the essential principle for money management. If money has free rein, it will surely take FULL advantage of this. When it comes to your finances, you should think of your family as it's own business. If your family's income is $4,000 and you discovered you've spent $4,250 that's called overspending and it's a problem. With a budget you'll be able to identify where the additional $250 was used and prevent it the next month. I've discussed this in more detail in my post 'Budgeting Basics'.
TRACKING
Along with having a budget, intentional tracking of our income and expenses is certainly necessary. Think about cost tracking as the Robin to budgeting, who is, of course, Batman in this analogy. Creating the budget is the initial foundation to controlling our money, but tracking those items is the execution part of the process. This effort will take INTENTIONAL effort. I am consciously and subconsciously tracking my finances every day. It will help expose areas of overspending, underspending, and opportunities to apply more money to debt, savings, and/or investing. There are many apps that help tremendously with this effort. One of those apps that syncs between your phone and their online site is called EveryDollar, which is the app that we use. Think about taking the leap to try it out. Contact me if you need help.
LEAVE CREDIT CARDS AT HOME
The definition of credit card is the following: a small plastic card issued by a bank, business, etc., allowing the holder to purchase goods or services on CREDIT. The definition, itself, describes the use of something to obtain a product with money we don't have. Continuing to spend money that we don't have will guarantee a tough financial future for us and our future family/children. The average family is carrying $16,000+ in credit card debt which brings the total for the U.S. to billions in revolving debt. It's not that credit cards themselves are bad, BUT the incorrect use of them is the problem. This is the downfall of the american family's income. Credit cards have their subtle benefits, but continue to maintain a bad reputation because a majority of the population use them incorrectly, portraying the card as the issue.
There are a rare group of people that actually use their card and pay it off each month to prevent debt accumulation. If you are doing that responsibly to establish credit, you deserve an award. Although some are able to accomplish timely credit card payments, we should all strive to only spend money we have in our possession to remove the risk instead of using credit cards. If we can make this one change of leaving your credit cards at home it will yield a great difference in our financial futures.
GOAL-SETTING
The only way that we can prevent overspending is to make it a goal that we take intentional steps toward accomplishing. This will be a long--term effort and will take some time to conquer, but long-term goals keep us motivated during short term setbacks. Some of us feel like we're going through hell when these setbacks hit us hard. A great man once said, "When you're going through hell, you keep going. Don't quit and make a home in the fire." Keep an optimistic outlook by considering those small setbacks an education rather than a failure. Learning to fail fast and educate yourself is how experience is gained and success is born.
Many people dream to prevent overspending and start building wealth. The problem is that it stays just that, a dream. It's okay to dream because it doesn't cost us a thing, but if change is desired, that dream needs steps that lead to a finish line. Let's work on this, we don't want to be broke forever. A change in overspending by setting a goal for this and using the advice above is the beginning of leaving a legacy for our future descendants.
1 Corinthians 9:26
Therefore I do not run like someone running aimlessly; I do not fight like a boxer beating the air.
PSALMS 112: 1-2
Praise the Lord. Blessed are those who fear the Lord, who find great delight in his commands. Their children will be almighty in the land; the generation of the upright will be blessed. Wealth and riches are in their houses, and their righteousness endures forever.
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