Monday, November 17, 2014

How To Curb Your Spending

It's November, which means it's getting close to the holiday season (Thanksgiving included, of course)! It also means that in the next couple of months that you may see your bank account quickly dwindling from overpriced plane/bus/train tickets home, gifts for friends and family, decorations, a new outfit for your company Christmas party, and having to cook something fancier than a peanut butter and jelly sandwich for a house full of people. As a young working professional, this may be the first time you've actually had to chip in and pay your way through the holidays (instead of bumming off of your parents). So here are some tips from Ruby, Vanessa, and our friend Taylor on how we try to curb our spending so we can save up for something important, or just make it through January 1 without zeroing out our bank accounts.

#1 Taylor's trick:
Curb your spending by drafting a budget and sticking to it!

Always make sure you have a zero sum budget going, i.e. your expenses + savings = income. A budget helps you prioritize what you need versus what you want and keep to reasonable limits on a per-month basis. This goes for holiday gift shopping too! Instead of busting out my credit card, haphazardly spending come Black Friday, I plan early how much I want to spend for gifts and figure that into my budget. If that means I have to cut a few corners in December on other expenses like eating out or save up some extra money by working overtime or hustling at a side gig, that's fine. The worst thing for your wallet (and your sanity) is to not have a plan and, come January 1st, suffer from post-holiday debt. Womp womp.

#2 Vanessa's trick:
How many hours would I have to work to pay for this? 

When I'm deciding whether or not I am going to purchase something I don't absolutely need I try to think about whether I would be willing to barter for the object. If time is money, then it follows that money is time. I've already calculated my hourly wage (minus taxes), and I do a quick calculation to see how much time I'd have to work in order to pay for the object. Would I be willing to work two full hours if my boss handed me this pair of shoes instead of a check? Five hours for a dress I might wear once?

If I wouldn't be willing to work for it, I won't buy it.  Because regardless of if I have saved enough to afford a splurge buy, I did have to work a certain number of hours in order to make the money so I would still be essentially spending my time. I still buy things I don't need from time (new pots or pans, impractical shoes, artwork), but it's always something I feel like is worth my time.

#3 Ruby's trick:
Would I rather have this cute sweater or would I rather have an awesome house?

I am a bit of a homebody, so I know that one of the things that will help me to feel comfortable in life is having a place to carve out as my own. An apartment lifestyle doesn't cut it for me because I can't customize in the way that I want to. So as soon as I got a job, I planned my budget (see #3) to include my goal of saving up for a down payment on my own home. However, it can be hard to keep to that budget when you're faced to the day-to-day whims of wanting that fabulous and cheap new sweater at Target. I find it easiest to curb my impulse buys by simply asking myself: do I really want this sweater more than I want my house? The answer is usually no because your big savings goals are by nature a bigger deal that your smaller spending goals.

You can do this with any big financial goal, too. For example:
  • If your big goal is to get a flat screen TV, then you might ask: Would I rather get this DVD right now or would I rather save up for a nice, wall-mounted flat screen to watch it on? 
  • If your passion is combating world hunger: Would I rather get this cup of Starbucks or would I rather pursue one of my passions by donating $1000 to X charity this year? 
  • For those with college loans: Would I rather have this fancy crab dinner or would I rather be debt-free?
When I compare my short-term impulses to my long-term goals, it helps me to put my purchasing habits into perspective. I'm happy to go without the cute sweater because it means I will be happier in the long run when I get my safe, comfortable, awesome home.

With these tools in your arsenal, you should be able to make it to 2015 without breaking the bank. Do you use any other trick to try to keep yourself financially in line?


Vanessa and Ruby

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PPS. Don't forget to check out Taylor's blog for more tips on personal finance, social commentary, and so much more!


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