Are shopping or entertainment bills piling up every time you go out with friends? Do you feel a greater compulsion to spend more money than usual when hanging around with certain friends? Are your bills out of control, but you don’t know why? If you’re having trouble saving money or make compulsive purchases because of peer pressure, then it’s time to get a handle on your personal finances and take control of your spending when you’re in tempting situations.
It’s important to stick with a budget based on your income, especially if you find it hard to resist certain temptations, such as cruising through Groupon to book a wine trip, take a look at some easy do’s and don’ts to avoid impulse purchases.
1. Know your weaknesses
You won’t be able to make changes or improvements to your spending habits until you’re able to see where the bad choices are being made. Do you feel compelled more when you’re around certain friends? Is the driving force a desire to appear more successful, or is it more likely that you are trying to keep up with other big spenders?
Take a hard look at what motivates your bad spending decisions and find a way to turn that around, whether it is through changing your attitude or giving yourself a savings incentive.
2. Make a plan
Sit down and go over your budget to know what you are spending money on. Make a list of all needed expenses, like housing, food, car payment, insurance, gas and utilities and know that total. Subtract that amount from your monthly income. Make another list of savings you are tucking away each month into retirement and other accounts. Subtract that amount from your income, then compile a list of all unnecessary expenses you often incur, and decide where you’re going overboard.
Scrutinizing bank past statements can help you see these expenditures more clearly, but a good budgeting app like Mint can help you watch your spending on the go.
Look for patterns. If you find you have food in the ‘fridge that goes bad every week, then decide how to reduce spending on groceries. If you often feel like you have to buy the latest trendy thing and quickly lose interest in those items, change your mindset and set priorities. Don’t worry about buying things simply because your friends have them. In a month or so, they will probably be bored with the stuff, too.
3. Make a list and check it every time
Make a checklist of qualities needed to make a purchase worthwhile, and put every expenditure to the test before you make them. Keep the list in a note on your phone so you’ll always have access to it.
4. Give yourself incentives
Just like any other bad habit, you’ll only be successful if you want to change. If you give yourself some meaningful incentives, you will be more likely to stay strong in the face of financial temptation. If getting the credit card bill(s) every month cause a great deal of stress, then make a plan to cut the balances down by paying more each month and cutting back on spending. Savor the feeling of reduced stress every month when the bill comes as a reward for staying on track.
Another incentive is to come up with a penalty you charge yourself when you buy something that doesn’t meet criteria set for unnecessary purchases. Make the penalty equal to the cost of the item you buy, and earmark that money toward a savings account. Knowing that if you that spend money on an item that it will cost you double, you may get a better feeling about what the entertainment value of the expense is.
Another way to reward yourself is to give yourself a credit for saving. If you’re not saving enough for retirement, emergencies or other future events, increase the amount you allot to the fund, but set aside a smaller amount to make a special purchase every so often. Budget for fun and play as you would regular expenses, and stick to the budgeted amount.
5. Find discounts on daily deal websites
Groupon, LivingSocial, Gilt and Yipit are just a few of many great websites that offer deals on fun activities, dining, products and more. If you’re going to do something, why not do it for a steep discount?
6. Don’t shop hungry
Whether you’re buying food for a dinner party or a Halloween shindig, strutting down the supermarket aisles when you’re hungry is a disaster waiting to happen, as you may pick up many unnecessary items.
7. Shop with cash
There are two benefits of buying with cash. It’s easy to set a budget — if you leave the house with $100, you can only spend $100. There’s no way around it. You may even end up spending less. Instead of charging something on your credit card, you’re actually watching the money leaving your wallet, which can deter you from overspending.
8. Avoid purchases when you’re emotional
We all have good days and bad days. Just because you got that bonus at work doesn’t mean you should spend it all, right now. At the same time, if you’re upset about something, it’s easy to console yourself with a nice vacation or an expensive pair of shoes. It might temporarily help you feel better, but in the end, it may end up being stressful, especially if you’ve overspent.
9. Don’t shop with an ‘enabler’
Adults rarely recognize when they are applying peer pressure to others, and mean well when doing so. If a friend often says, “You should buy that. It looks great on you,” or, “You deserve to treat yourself!” often, they may not realize they are encouraging behavior you would like to change.
Simply have a talk with the friend and let them know you want to start saving more and spending less. Invite them to join in on your new frugal ways and share the incentives you have given yourself. When they slip up and suggest you spend money on things you don’t need, smile and remind them you are on a saver’s path.
Peer pressure is usually only easy to recognize when it is overtly done, but it isn’t always obvious. Feeling like you have to keep up with friends’ spending habits is a form of peer pressure, even your friends aren’t directly encouraging the spending behavior. It’s up to you to take charge and let go of the desire to feel like you are leading the pack in the buying game.
Mariel is a staff writer for MyBankTracker.com. Her columns focus on consumer spending, bank accounts and money psychology.