Any questions you have related to finance that you would like T.I.W.U.B.com to answer, simply send it to firstname.lastname@example.org!
Reader Question #2: How do I keep from overspending?
“I wouldn’t go as far as to say I have a full blown spending addiction, but I would like to figure out a way not to be so tempted to spend all of my money every month. I do notice I spend more when I’m with friends shopping vs alone but alone its still a problem. Do you have any tips?” -Nicole
Answer: Although having the influence of good friends who aren’t addicted to impressing people definitely helps, ultimately, it depends on you. And in my opinion, since advertisers and the government has gone to war on our wallets trying to keep us opening them up, we have to go to war as well and attempt to keep them closed. Besides obviously destroying all of your credit cards (which I would do and do it ASAP), here are three things you’ll need to do just that:
A. Force Yourself
A great way to avoid overspending is to not be ABLE to spend in the first place. Force yourself to only spend what you have available. Take the excess money out of your sight and ability to spend it. Place it somewhere where you can access it in emergencies but thats not staring at you in the face every day begging you to spend it. Here are a couple of good places to place your money so you can force yourself to save. Yes these are a bit unconventional but at this point with the increase in Americans who are coping with misbalanced spending habits and addiction to stuff in general, its time to step it up a notch:
1. In a CD. 3 month,, 6months, 9months, whatever it may be, make sure it has a fair interest yield along with a penalty for early withdrawal. Nuff said.
2. Brokerage accounts– By transferring excess funds to a brokerage account and even using it to purchase a small amount of stock, the couple extra steps you’d have to make so you can retrieve the funds, are great deterrents. You’d have to sell whatever stocks you have, wait 3 days for the brokerage to receive the funds for the sale, then spend 1-2 days transferring the funds back to whatever bank you have. And truthfully, sometimes its better that the stock value is down temporarily. Why? Because 1- you should be investing for your future anyways and 2- if the stock was up, you’d be more likely to try and cash out then end up spending the money on something stupid which doesn’t allow that money to work for you. We know over the long term, the market has an upwards bias (it generally increases on average 10% vs decreasing) so use this to your advantage. Lastly, even if you dont use the cash to buy stock while its in there, simply having it sit in a brokerage account (yes, untouched cash balances do earn interest in most brokerages) it still forces you to wait a couple days to receive the funds should you initiate a transfer. This is particularly helpful if you get those urges to go on last minute shopping sprees after a bad days at work.
3. Any other account with a minimum balance requirement. Money market accounts, high yield savings accounts etc. If
the funds you’ve placed in these accounts are somewhere near the minimum balance requirement for that account and you dont want to pay account maintenance fees, it’ll make you think twice before withdrawing. Make sure the penalty for withdrawal on these accounts is simply that you’ll have to pay a monthly maintenance fee. FYI- this entire option (#3) isn’t my favorite but still effective nonetheless.
B. Trick Yourself
A lot of people’s addiction to spending is just that – an addiction to swiping for a product that it feels good to retrieve. Its almost as if you’re doing the American version of hunting and gathering. This may sound funny but I urge you to think about it a little more in depth.
One of my friends, Natalie, recently described a strategy that has been working well for her. She realized she couldnt trust herself around all of the trendy department stores, brand name undergarments and sparkling accessories. So instead of giving in, whenever she got the urge to splurge, she actually convinced herself to splurge -only not at those locations. What she did instead was opt to take her and her daughter to the 99 cents store and buy a whole bunch of fun things to satisfy that urge to buy. She would also go into the used clothing stores go crazy on whatever she saw. Typical amount she would spend on a trip to the mall? $400. Total cost in the extreme discount stores and used clothing boutiques? $20-$30. And most of the thins she bought would allow her and her daughter to have fun for days.
C. Attach Yourself
No matter which option you choose from the first two, while you’re out in the streets, you’re most likely going to have some sort of currency physically on you. So why does that currency have to be in the form of plastic? If you are one of the many people who do have overspending issues and you are serious about your goals to correct this, you should think of switching to cash. Unless you are a B.E.T. rapper who regards money only as a tool to “make it rain”, you probably have a normal human mindset that has more of a connection to giving away actual physical dollars. Most people will think twice about pulling cash out of their wallets and spending real physical currency vs an impersonal plastic card.
If you are worried about emergencies, feel free to carry a bank check card connected to a seperate checking account. You’ll want to make sure this checking account is separate from your main account, that you always keep a low balance in it and that you always know what that balance is. Now, if you’re worried about carrying so much cash on you and how you could be a target for theft, then this is definitely not the option for you. Remember – consumerism, overconsumption and being stuck in a mindset of “keeping up with the Joneses at all cost” are technically theives of your money. While trying to keep society from stealing your money, you shouldn’t also have to worry about society actually stealing your money as well.
-J.P. Lynn aka ManAgainstDebt