Spending money is a necessary part of life. We need to pay for housing, food, clothing, entertainment, and countless other things. However, when spending becomes a habit that goes beyond our means, it can lead to financial stress and even debt.
According to the recent statistic provided by Numbeo, the cost of living excluding rental for a family of 4 in Singapore is an estimated $5,630.50 per month and a single person spends $1,555.60 per month. With Singapore’s median salary reported at $5,070 (take-home pay at $4,504 after minus 20% CPF), it’s hard especially for families to really enjoy traveling and spending money at all.
If you find yourself frequently overspending, it’s time to take control of your financial habits. Here are some strategies to help you break the habit of spending money and improve your financial health.
The Psychology of Overspending
Before we delve into the strategies to curb overspending, it’s important to understand why we overspend in the first place. Overspending can be triggered by various factors, both emotional and situational.
I want that LV Bag too!
Our emotions can significantly influence our spending habits. We may splurge on nonessential items to lift our spirits when we’re feeling down or to celebrate when we’re feeling happy. This spending pattern is often called “retail therapy.”
According to Elizabeth Dunn, a professor at the University of British Columbia and chief science officer at Happy Money, people often have a lot of stress and emotional baggage around money.
Overspending can be an attempt to relieve these emotions.
We buy stuff to make us feel good but we don’t actually need them
To avoid emotional spending, it’s important for people to understand how to control their emotions when making any important purchases.
Modern conveniences like online shopping and mobile payment apps make it easy for us to spend money. We can buy virtually anything with just a few clicks, often without even thinking about whether we really need it.
These conveniences, however, can lead to impulse buying and overspending.
Moreover, societal pressures and the influence of social media can also lead to overspending. We may feel compelled to keep up with the latest trends or to match the lifestyles of our friends or influencers we follow.
With convenience becoming an “everything factor” in our purchases, Singaporeans might also be overspending on subscription plans that they don’t often use. Check-in with yourself whether you’re using your Netflix or Disney+ accounts daily.
How to Control Your Spending
Emotional and situational triggers becoming more common thanks to online shopping and social media influence.
It’s important to take a step back and find ways to better control your spending.
Here’s how you can take better control of your finances:
1) Set Clear Financial Goals
Having clear, measurable, and achievable financial goals can help you prioritize your spending. Whether it’s saving for a vacation, paying off debt, or building an emergency fund, having a financial goal gives you a reason to resist unnecessary spending.
2) Create a Budget
A budget is a financial plan that outlines your income and expenses. It helps you understand where your money is going and identifies areas where you can cut back.
Creating a budget and sticking to it is one of the most effective ways to control your spending.
3) Stick to It!
Keep a record of all your expenses.
This will give you a clear picture of your spending habits and help you identify areas where you’re overspending.
Learning how to stick to budgeting isn’t hard and some people actually enjoy this process. You can use a budgeting app or a simple spreadsheet to track your spending.
Money Manager helps increase my Saving Rate!
4) Use Cash Instead of Cards
Studies conducted by Nerdwallet have shown that people tend to spend less when they use cash instead of credit or debit cards.
Maybe we actually feel the pain more when we spend actual cash and having to feel our wallets getting lighter😅
This is because paying with cash makes the cost of purchases more tangible, which can make you think twice before spending.
5) Make a Shopping List
Before you go shopping, make a list of the items you need.
Stick to this list and avoid impulse purchases!
This strategy not only helps control spending but also prevents you from buying items you don’t need.
6) Looking out for affordable alternatives
The best way you can drastically reduce your spending is by finding affordable alternatives.
Wholesale, clearance, and discount sales that are below market value are great opportunities for buyers to step in and make better financial purchases.
Alternatively, by buying bulk during discounted events, buyers get to enjoy not having to look out for similar products in the future.
7) Get an Accountability Partner
Having someone to hold you accountable can help you stick to your budget and resist the temptation to overspend. This could be a family member, a friend, or even a financial coach.
To make it more exciting, step up your game with your loved ones by setting challenges and punishments to accelerate each other’s saving rates!
8) Avoid Paying for overpriced Branded goods
Who doesn’t like to feel like a king for buying the latest trend or hype goods?
People seeking to save money should steer clear of paying for overpriced branded goods. Often, the allure of well-known brand names comes with a hefty price tag that primarily reflects marketing and prestige rather than intrinsic product quality.
In today’s market, many affordable and high-quality products exist, allowing savvy shoppers to allocate their hard-earned money wisely and prioritize their financial well-being over the status associated with expensive brands.
To avoid emotional spending, a rule of thumb to follow is withholding any purchases for at least 24 hours. Oftentimes once your emotions die down, your desire to make the purchase might ease off.
9) Find happiness by Spending less
Contrary to the consumer-driven notion that happiness is directly linked to material possessions, research shows that lasting happiness often derives from experiences, relationships, and personal growth rather than the accumulation of things.
By embracing a frugal lifestyle and reevaluating their spending habits, individuals can find contentment in simplicity and minimalism. Redirecting resources towards meaningful experiences and investments in personal development not only fosters greater happiness but also provides long-term financial stability, making it a wise choice for those aiming to save money while enriching their lives.
Shift your mindset and find joy in spending less and saving money. Celebrate your frugal achievements, and recognize that financial security and peace of mind are often more rewarding than material possessions.
10) Check in with your Financial Advisor
At the end of a quarter or year, you may regularly consult with a financial advisor to review your financial goals, assess your progress, and get expert guidance on managing your finances effectively.
Having your very own trusted financial advisor can help you to achieve your financial freedom.
If you don’t have one and you are looking for a financial advisor for advice, be sure to contact Benjamin Chong from HSBC Life down below!
The Impact of Big Decisions on Spending Money
While small changes can make a big difference, it’s also important to consider how big decisions can impact your spending. For example, buying a house or car, going on a vacation, or even getting married can significantly affect your finances.
Before making a big purchase or financial decision, consider whether it aligns with your financial goals and budget. It’s also helpful to compare the cost of the decision with its potential benefits. For example, would you be happier spending money on a big wedding or on several years’ worth of vacations?
Start Breaking Your Bad Spending Habits
Breaking the habit of overspending isn’t easy, but it’s definitely possible. By understanding the triggers of overspending and using proactive and reactive strategies, you can take control of your spending and improve your financial health. Remember, the goal isn’t to stop spending entirely, but to spend wisely and within your means.
The art is not in making money, but in keeping it
With determination, discipline, and the right strategies, you can break the habit of overspending and start building a more secure financial future.