It’s one thing to set a budget, but quite another to stick to it. However, at Way Forward we know from experience that sticking to a budget is one of the most important keys to financial wellbeing. Our clients tell us what a relief it is to have a workable budget that helps them pay off their debts while also meeting their current needs.
We’ve noticed three key spending habits that can wreak havoc on personal budgets. Read on to learn how you can avoid falling into some of these traps.
Ignoring the real cost: Tap and go is a convenient payment method, but it distorts our sense of the true cost of goods and services. This disconnection from reality is magnified when we use our phones to make payments, and it becomes easy to forget that we are actually spending money every time we tap and go. If you find yourself trying to justify your spending, hiding receipts, or making a large number of purchases in one shopping trip, it’s worth thinking about whether ignoring the real cost of goods is pushing you towards financial difficulty.
Using tomorrow’s money: With the rise of buy now, pay later (BNPL) and wage advance products, as well as easy access to credit, it has become very tempting to use tomorrow’s money before you even have it. However, this spending habit can quickly lead to becoming trapped in the debt cycle; if you’re regularly using BNPL or wage advance products to pay for essentials like food, medicine, housing or electricity, it’s important to reach out for help before things get worse. In June 2023, there were 200,000 more credit card accounts than there were 12 months prior, which suggests to us that this is a very common problem.
Buying for the sake of it: Impulse purchases provide a momentary high but often lead to regret, and are rarely for goods and services that we actually need. Try to determine the reasons behind your impulse buying – perhaps you’re bored, in need of some social connection, or you’re shopping for entertainment. Way Forward client Sue developed unhealthy online shopping habits during COVID lockdowns: “I knew that it was getting out of control when my repayments were more than I could afford. I talked to a counsellor and realised that my online shopping was an addiction. I didn’t necessarily need the stuff that I was buying”. If this sounds like you, know that help is available and you’re not alone.
Building better money habits
We’ve seen time and time again that these habits work. Our client Brian built better money habits and reached his goal of being debt free: “I’ve learned discipline: distinguishing wants from needs and using cash for essential purchases”. At Way Forward, nothing makes us happier than seeing a client move into the future without the burden of debt.
Instead of being stuck in habits that are bad for your budget, focus on developing new money habits that will lead you towards financial wellbeing. Here are five steps you can take towards more intentional spending and a healthier savings balance.
- SAVE: Make sure you have the money before you make the purchase. Create categories in your budget so that you’re saving for expenses like gifts, entertainment, and clothing throughout the year. But don’t stop there – look at how much you’re spending on each gift and consider inexpensive and creative options that prioritise spending time together, creating memories or appreciating the simple things in life.
- STYMIE: Create some friction in your financial routines and make spending money harder. That might mean removing payment options from your phone or web browser, or putting savings into a bank account that you can’t access when out and about. Some people even put stickers on their credit cards to remind them of their financial priorities at the point of purchase.
- SLEEP ON IT: Let your purchases spend 24 hours in the shopping cart before you hit “confirm purchase”. You’ll be surprised how often the initial excitement wears off and you no longer want what yesterday had seemed like such an essential purchase.
- SWITCH: Start using a debit card instead of a credit card so that you can only spend money you already have. This means you can’t accrue credit card debt (and frees you from the associated high interest rates) – you won’t miss the unpleasant surprise each month!
- STOP: It’s one thing to set a budget, but quite another to stick to it. However, at Way Forward we know from experience that sticking to a budget is one of the most important keys to financial wellbeing. Our clients tell us what a relief it is to have a workable budget that helps them pay off their debts while also meeting their current needs.
If you are experiencing financial difficulties, you’re not alone. Every day, the Way Forward team talks to people just like you who have found themselves struggling to repay debt.
Our clients are people who have experienced unexpected challenges like illness or addiction, unemployment, relationship breakdown or are financially overcommitted. Many remark that they never expected to find themselves in this situation, but they all share the same determination to become debt free.
We are here to help you find a way forward, and our services are free to clients. Let today be the day where you make a positive change – call us now to begin your journey towards financial freedom.