This is not an another article suggesting to make coffee at home rather than buy it from your favourite coffee shop, which is conveniently placed on your way to work. Today I would like to talk what and how shopping decisions affect your budget and stretch it to the absolute maximum. I promise I will share examples too!
Do you know how much you have already spent from the start of this month?
When I went to work in Boston for the summer I decided to write down every single thing I bought. Within a week I was able to notice what areas I was spending too much money on. Although I originally did it to know where and how big are the financial differences for a young female living in Boston in comparison to the one in Aberdeen, it gave me a great foundation and insight into my financial decisions.
It can be hard being cautious with your spendings, especially when you pay by card. Contactless payment is a very convenient method of paying however, it is also a very easy to forget about. To improve budget management knowing how much money is being spent each month is the first step towards a change. So write it down! It does not have to be start of a week or month. The sooner you start the better for full overview.
How much are you really spending for each financial category?
Do you use your savings account to pay your bills because there is nothing else left in your current account? That is not ideal, is it? Another helpful step towards better budget management is knowing how much money each category requires at the beginning of the month. This allows you to plan in advance where money should go and which spending areas have to be reduced to make up for this.
What are priorities for your expenses?
Know your financial priorities, there is no way to avoid paying bills. However you can get ready in advance to pay what you know you will have to pay anyway. This helps to avoid nasty surprises at the end of each month.
I have direct debits, which automatically pay off my housing and utility bills set up between one to three days after my monthly wages are paid. This is a great way for me to know how much exactly I have left till the end of a month.
How often do you treat yourself?
Bad day at work? Something on the way back home sounds nice as a way to cheer up, doesn't it? I used to cheer myself up with new calendars, planners, and other stationaries. My excuse was that it will definitely help me improve my time management, organisation skills, and effectiveness. Truth to be told at some point I had enough stationaries, notebooks and other cute things to last me for a life time. I could open a nursery for 100 kids and each and single one of them would be flooded with pencils, crayons, pens... I have not noticed how much actually I spend a month on things, that supposedly should help my organisation skills but in a long run are actually cluttering space around me. Since I opened my eyes to this I reduced the amount of Cheer Me Up Stationaries and saved around £30 a month, which is £360 a year, which to be fair is a last minute travel deal to an exotic country.
What do you treat yourself with? Fizzy drink at lunch time? Cereal bar on your way to work? I am not saying you have to cut it. However, know how much you are spending to treat yourself. Do you actually do feel treated afterwards? Or is it just a routine? For example if you like Special K Cereal Bars, instead of paying however much per one you can often get five of them from a Poundshop.
Are you an emotional buyer?
Once I returned home from work, after an extremely long and tiring day, and there was nothing to eat! I was frustrated, angry and immediately went to a grocery shop. What I ended up doing is adding to my basket everything I thought I might want to eat. I did not think clearly, I was hungry, annoyed that the weekly shopping has not been done yet again and I just wanted to get it done and over with as soon as possible. This time I picked labels I knew from TV, I did not look for saving deals, and I ended up buying more than I could eat.
Adverts are also there to manipulate your shopping choices and prompt you to buy things that you would not consider buying prior seeing or hearing visual or audio stimulation. Look for cheaper brands below and above your eye sight. Make sure you are aware of that, and buy what you really need not what you are told you should have.
How much is too much?
Do you really need what you are buying? I can tell you one of my experiences, a few years ago I was finding every now and then perfectly fitted black dresses. Sometimes the dresses would be on sale and sometimes they would not. Perfect for work I thought each time on my way to the till. Over £300 pounds later I had 6 very similar dresses in my wardrobe, in a gorgeous black. What happened next? I lost weight, a lot of weight actually. I did not plan it so I could not predict that. However did I really need 6 black dresses? No, I did not. Two would have been more than enough, especially that I had other clothes as well.
Unreasonable, unjustified shopping choices like the one above effectively prevents smart budget management. Today instead of just buying something because it's on sale I ask myself these questions before. Add questions from another blog post.
Are you paying for the lifestyle you want but cannot afford?
Behind each product there is a team from the marketing department trying to sell you not only the newest fragrance, phone, camera, fitness band but also a lifestyle associated with this brand and product. Branding is used to sell a particular lifestyle, which you are meant to desire. Trendy cameras should in theory allow you to join the circle of trendy people, who already posses one. That is why celebrity endorsement is so popular. It tries to convince you that with this fitness band you also buy the attractiveness of a model who presented it to you during the advert, when you are impatiently waiting for Youtube video to play. However, can you really afford following the trends to still be in the circle? New, updated, sexier product launches every year possibly twice a year. How long are you able to keep up before realising that you have fallen into a marketing trap?