Staying on top of your spending doesn’t always come naturally. If you’ve slipped into one of these bad habits, you could be damaging your financial health.
If you’ve been scratching your head over where your money goes every month, it could be down to one of these common spending traits. Take a look at how you can steer clear from these money-draining habits:
1) The impulse spender
Impulse spending is where you splash the cash on things you hadn’t planned to buy. Often, the money is spent on things you can’t afford or don’t really need. Let’s say you go out shopping for a much-needed pair of shoes… but come back with a new jacket, a coffee machine and five candles. Sound familiar?
This type of spending can drain your bank balance before you know it. While there could be lots of tempting offers and deals, it’s important not to get carried away and remember your budget before you part ways with the cash.
What to do about it: If you’re just about to buy an unplanned purchase, you could put it back on the shelf and wait for a set amount of time; for example, 30 days. If you still want to buy it once this period ends, you could factor it into your budget for next month.
Also, think about whether you need it or not. If you don’t, then ask yourself if you can afford it – if the answer to both these questions is ‘no’, put it back.
2) The credit card spender
Many people use a credit card to cover the cost of things they can’t afford at the end of the month. This can be a dangerous trap to fall into, as ‘next month’s problem’ can quickly become a mounting pile of debt that’s tricky to shift.
It’s important to only use a credit card when you’re confident you can repay the total cost in full the next month. Or, if you have a lower interest rate – like a 0% APR credit card – only spread the cost within reason and clear the balance before the interest-free period ends.
What to do about it: If you’re finding your credit limit a bit too tempting, you could ask your lender to reduce it.
Alternatively, see if you can set up a spending alert with your lender. Once you’ve hit your personalised limit, you can receive text or email alerts that'll let you know when to put down the plastic.
3) The convenience spender
Sometimes in life, it’s just easier to pay that bit extra. Whether it’s that daily meal deal, your nice coffee on the way to work or grabbing a quick cab to get you there quicker, there’s no doubt that forking out for these treats can cut time and make life simpler.
However, this kind of spending can add up dramatically. For example, did you know that our daily coffee habit can cost us a total of £70 a month?
What to do about it: Treat these sort of purchases as one-off treats instead of daily habits. If you give yourself a bit more time, you could make your own lunches and coffee and start to walk a little more.
4) The budget-free spender
No matter how careful you are, if you’re not following a set budget, your finances could suffer. If you don’t know how much you can afford to spend once the bills have gone out every month, you’re almost bound to overspend.
Luckily, it’s easy to work out a budget. Take a good look at your bank statements at how much you have coming in and how much goes out on essential things like your rent, mortgage or any other bills and necessities. Whatever’s left over is your monthly budget – simple!
What to do about it: Try the 50-30-20 rule. Use 50% of your monthly income for essentials (like bills, transport and groceries), 30% for non-essentials (like activities and shopping) and the remaining 20% could be put towards any savings.
To help you stick to this, it could be worth transferring your non-essential spending and savings into different accounts once you get paid. This way, you can be sure you won’t accidentally dip into your essential spending.
5) The payday spender
Payday finally rolls around and you just can’t wait to get out and spend! Whether you’re getting a generous round of drinks in or going on a big shopping spree, you love to spend once you’re paid.
Unfortunately, this kind of spending can mean you’re left short at the end of the month and could mean you live paycheck-to-paycheck. This isn’t ideal as you might not be left with any spare money to cover any emergency or unexpected costs.
What to do about it: Once you’re paid, work out how much you can spend on non-essentials – then, you can break this down to what you can afford to spend each week. When you have this figure, you can move your money across, week-by-week, to a different card.
By only having your weekly spends on a card, you could avoid blasting through your whole monthly budget within the first few days or week.
Disclaimer: All information and links are correct at the time of publishing.