It is not your salary that makes you rich, it is your spending habit- Charles A. Jaffe
This is one of my favorite financial literacy quotes because it encapsulates the question that we face in making financial decisions- the question of what should I spend my money on. Your decisions about money will determine the condition of your financial life, so you need to have an idea of what you spend your money on.
Think about it for a minute. Can you identify what takes the bulk of your money per month? How much you spend in a month or what you spend it on? The feeling whenever you spend money? The truth is- whether you have a lot of money or very little, everyone around you is out to get it from you. It could be your friends asking to borrow money, your family asking for money, the favorite restaurant you frequent or your spouse. Everything around you is designed to take away money from your pockets.
So ask yourself, are you spending money because you really need what you have bought or merely to show off or keep up with friends?
Why do I need to identify my spending habits?
- Identifying your spending habits helps you make better financial decisions. It is easy to track your money when you know where, what and who is taking your money
- It helps you cut down on frivolities and focus on what really matters. There are some people that the bulk of their spending falls under the impulse category. They have zero control over their money because they believe it is there to be spent, so they may enter a supermarket to shop for something worth #5,000 and end up spending ten times the amount. Identifying your spending habit will help you curb that impulse.
- It will help you understand your spending triggers. Every habit usually has an event or feeling that triggers it. Your spending triggers are those places or people that makes you want to spend so much. While some people don’t need any particular reason to spend so much, some people spend because of reasons they have not fully identified themselves.
- It helps you live a debt free life. Once you identify your spending habit, you are able to limit your spending to necessities and thereby resist the urge to incur additional expenses for things you have no need for.
So for next week, keep a note beside you and try to write down everything you buy, your mood when buying it and the reason for the purchase.