Some things cannot be taught but are innate, like the habit of spending too much. Nobody teaches you to “overspend”. However, the truth is that few teach you how to spend your money wisely.
Before we understand how to prevent ourselves from overspending, we must know why it is necessary or how overspending is bad.
1. As the old adage repeated ad nauseam in Hindi films: Paise jhaad pe nahi ugte (money doesn’t grow on trees) is metaphorical. This oft-repeated phrase makes you understand the effort it takes to make money. Whether it’s a 9 to 5 job or a stressful business meeting, everyone knows the hard work behind making a living. Now, since we know how hard it is to earn, is it really wise to spend it on useless things? Think about it.
2. Overspending massively hinders savings and sometimes your emergency fund as well. Overspending happens when you break through the barrier of your fixed expenses. As a result, you are then encroaching on your area of savings or emergency funds. Imagine launching a new iPhone and your co-worker getting it on day one. Does it cause you to overspend? It is tempting for some.
3. When you spend too much, you create unwanted debt, especially when you don’t have enough cash reserves. The urge to overspend is so hard to overcome that we often fall prey to a credit card or personal loan. Not only are these loans expensive in terms of interest, but they are also often the party killers of your CIBIL scores if not paid on time.
I don’t think anyone was born a savvy saver or a born spender. Human psychology suggests that drinking habits are often determined by a child’s upbringing. Parental habits often determine how the child’s spending habits will be structured.
If you’re a compulsive spender (you might say you can’t help it), here are some tips to curb the urge and save:
1. Be sentimental about your money: One of the glaring differences between a spender and a saver is the latter’s habit of not giving a single paisa. Savers always find it difficult to part with their money even if it is for their basic needs. The reason for such rigid spending aversion behavior is their emotional connection to their hard-earned money and the pinching sensation they feel while spending it. Even if you can achieve half of what they feel, your goal is achieved.
2. Every expense counts: Even if it’s as small a habit as drinking coffee every day in your favorite cafe. People who overspend often feel that only big cars or lavish homes contribute to overspending. However, few expenses matter if they are consistent.
3. Spend on things that give your life meaning: Not only do these expenses make you feel better, but it becomes easier to “sacrifice” the unwanted expenses.
4. Automate saving, because you can’t spend when you have no money: Spendthrifts, as a species, never believe in the word “thrift,” let alone act on it. The reason for this is that their urge to spend is so high that they have their spending lined up before the paycheck even hits their bank accounts. Their online shopping carts are always overflowing with their to-do list. Let’s not even go, for now, to their social media accounts that hold so many unfulfilled dreams. So in such a scenario, if we can automate our savings, and through an investment such as a mandatory Systematic Investment Portfolio (SIP) mandate or any other useful tool to keep part of the salary aside , this would be one of the ways to curb the tendency to overspend.
Readers who overspend may be fed up with tips. But here’s an advantage: people who spend too much have many advantages over savers, such as quick decision-making ability, a fun (albeit unplanned) life, and the ability to go from debt to debt. debt free by simply cultivating a habit of saving too. It’s not always advisable to just be a money saver. A balancing act between a spender and a saver is where you achieve the optimal personal financial plan as well as a stress-free life that can occur due to overspending.
(The author is the founder of Money Mantra – a personal solutions company)
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Posted: Sunday 03 April 2022, 07:00 IST