We share a few tips to help you stop overspending now.
When the recession hit, frugal became the “new black” and it was hip to thrift. The average savings rate jumped from .08% in 2005 to 7.6% in early 2009. But as we begin to emerge from the recession, will Americans go back to our overspending ways and resurrect their poor spending habits? Sadly, it appears so. In the November 29, 2010 Newsweek article “The Urge to Splurge” by Stefan Theil, he states that the average savings rate has already slipped to 5.7%.
Fifteen million Americans are still out of work and yet, we are starting to spend money we don’t have. Why? Most of us ride the pendulum that swings from overspending to extreme frugality. When times are good, we spend more than we make. When times are bad, we become frugal zealots. But as frugal fatigue sets in, as it appears to be doing now, we start to overspend, setting the pendulum back in motion.
As Americans, we are extreme junkies. We love extreme reality television shows like The Biggest Loser where contestants go from overeating as a way of life to the strictest of dieting and exercise regimens. The thought of simply eating less and exercising more is not as interesting to us as watching someone endure wacky fitness and nutrition challenges.
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This extremist behavior occurs with our money as well. During economic crises, we swing from a lifelong habit of overspending to extreme frugality. We vow to never dine out again and to pour every penny into savings. What typically occurs is we stick to it for a week, maybe a month. Then, like binging on ice cream after a crash diet, we go on a spending spree, often spending more than we would have prior to our vow of frugality.
In addition to taking a financial toll, the extremes take an emotional toll as well. The psychological impact of debt and overspending is devastating. It causes feelings of anxiety, embarrassment and fear. On the other hand, swinging to extreme frugality causes feelings of deprivation. It’s time to find balance!
Bill Paying Strategies To Help Find Your Saving vs Spending Balance
But, how do you step off the pendulum? It’s relatively easy, once you know how. No matter what state your finances are currently in, the only way to achieve financial success is to spend less than you make.
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One key habit to develop that helps you to spend less than you make is to pay all of your bills on payday before spending a penny of your paycheck on anything else.
The benefits of paying your bills on payday include:
- Ensures the money to pay your bills is available.
- Encourages you to have your bills organized, which increases your awareness of your financial situation.
- Eliminates late fees, which is one of the greatest wastes of money.
- Strengthens your credit score.
- Gives you peace of mind, knowing that your bills have been paid.
The first few times you sit down to implement this habit it may feel a little overwhelming. Once you get the hang of it, you will actually look forward to the process and enjoy that feeling of control. Best of all, this is a habit that is effective in both good and rough economic times, whether you are pinching pennies or are financially well-off.
In addition to paying your bills on payday, it is also the best time to fill your car with gas and to purchase your groceries. By making both of these purchases on payday or, as close to payday as possible, you are ensuring these fundamental items are available to you.
The bonus of purchasing your groceries and gas on payday is that in one day you take care of three of your biggest weekly (or bi-weekly) chores and procure the items that are most important. Also, now that your bills have been paid, your gas tank is full and you have plenty of groceries in your kitchen, you know exactly how much discretionary income you have for that pay period to spend. How great will it feel knowing that you have taken care of all of the important responsibilities and that the money you have left over is yours to spend as you please?
Gaining control of your finances is a matter of creating fiscally healthy habits and routines. This is just one habit to help you step off the financial emotional rollercoaster.
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