Many people have an unhealthy relationship with money. They use it to bring immediate satisfaction, but this hurts them in the long run, for example, not saving or investing, impulse buying, uncontrolled borrowing and living beyond their means. They know what they should do for better financial health, but they just can’t seem to break free of their spending habits.
Our relationship with money develops at a young age and is reinforced as we mature. Thus, it can be difficult, but not impossible, to correct bad financial habits. The following tips can help you redefine your attitude towards money and give you more control over how you spend it.
- Be mindful of your financial habits
The first step towards resetting your relationship with money is actually being aware of it. Reflect on your recent expenditure and ask yourself if it is aligned with your long term goals. List your best and worst purchases in the last few months and how much they cost you. Make it a habit to track all your spending. You can use a digital spreadsheet, app or a tracking notebook.
- Identify triggers of bad financial behaviour
As you go over your list of recent expenses, try to remember how you made the decision to buy, your state of mind, where you were, and who else was involved. You will notice a trigger for some of your impulse spending episodes. There will be times when, because of what you are feeling, it is easier to give in to the temptation to spend money. Maybe you are more careless with your coins when you are in a good mood and you want to reward yourself. Or perhaps you’ll go on a shopping spree to make yourself feel better after a rough day. You may want to impress certain friends and always offer to pay the bill. Whichever the case, you need to know which factors compel you to spend money so that you can control how you respond to them.
- Introduce spending barriers
Restrict what is available to spend by only keeping a certain amount in your wallet, mobile money or checking account. The rest should be placed in a savings or investment account, where it is not as accessible. Leave your credit or debit cards at home if you go out, bringing only enough for the activity you are going out for. If passing near a mall triggers your shopping bug, then avoid malls. If certain friends cause you to use more than you should, limit interaction with them or change the setting to one that doesn’t require spending.
- Envision a long-term goal
Restricting your spending will make you very uncomfortable at first. Why should you keep doing it? Because of where you want to be in the future. Envision that future self, along with the financial goals you want to accomplish. Place visual reminders around you so that when you encounter any temptation to spend, they can help you to overcome it.
- Work with a professional
A financial advisor can help you create and implement a long term financial plan. While you don’t necessarily need one, resetting your relationship with money is quite the challenge, and having a professional to walk you through can alleviate much of the stress. If this is not a good option for you, then have an accountability partner or other support system to provide the encouragement and optimism you need to succeed.
In conclusion, it will take time, practice and yes, even failing a few times to successfully rewire your brain to let go of years of bad financial habits. The aforementioned tips will increase your chances of success but ultimately, you need the will to practice healthy financial behaviours so that you can achieve your goals and live your best financial life.
This is a good advice. Very useful to many who are starting off. What about the relatively informed and seasoned players? We all can learn a new thing or two.