As of this moment, spending money makes me sick! I used to spend on average $1,300 a month on my one and only personal credit card, but for the past three consecutive months I've spent $2,500-$3,000! So what caused this sudden jump in consumerism you might wonder? Well, part of it was due to a raise, another part was do to finally upgrading to a Macbook Pro 15″ from my 6 year old iBook, and the final part was due to the desire to experience new things and be more spontaneous. Wheee!
Almost all of my expenses, including food, clothing, cell phone, travel, and entertainment are on my card. What can I say, I love my home rebates. Despite paying the card off in full every month, I've finally reached the breaking point and need to go the other way and spend 50% less than I normally do to restore balance in the force. The reason is because I've actually started entertaining the idea of NOT paying off the card in full and just paying what I “feel is the right amount” i.e. $1,300-$1,500, thereby being stubborn and punishing myself by incurring extra interest charges.
WHAT I LEARNED FROM THREE MONTHS OF OVERSPENDING
1) Everybody has a natural spending range. It's kind of like your weight. Everybody has a weight range they fluctuate in if they live a normal life. It doesn't matter how much you work out, or eat right, you're never really going to break the band of your normal weight range, unless you go to the extreme. I've discovered my natural spending point on EVERYTHING other than my mortgage is between $1,200-$1,800. If I spend more or less, things start feeling annoyingly weird and I course correct.
Task: Find out what your natural spending range is by totaling your past 3 months of expenses and dividing by 3.
2) Making more money inevitably always leads to spending more money. After my raise, I told myself that I would bank the entire increase into savings. I calculated my additional after tax income, and set up a bi-weekly automatic transfer out of my checking account and to my savings account. The problem is, I was only a click away from transferring that money back into my checking out and spending it. I failed to take that extra additional step, and transfer the money out of my “go broke bank” and to my savings bank.
Task: Transfer your extra income to a completely different bank now! And if you have no extra bank to stash away your hoard, open one up.
3) More money can make you happier, but it can also make you more frustrated. I loved the experience of going to Costa Rica on a whim for a week. The surfing was incredible and so was the food. Too bad I'm currently frustrated about my overspending three months later!
Task: Devote extra time in capturing your experiences. Use video, camera, and your laptop to record every single moment, down to the very details. Then, go ahead and review your memories on a regular basis!
CONCLUSION – JOIN ME IN CUTTING DOWN SPENDING
If I had that extra $5,000 cash, I could buy a shiny new gold watch for goodness sakes! Just kidding…. maybe. It's crazy how quickly things can add up. The good thing is we have a natural mechanism to revert to our steady state. Our body tells us when we are full and when we are tired. It's good to just be cognizant of what our mind is telling us by studying our spending habits and reflecting.
As of today, my goal for the next three months is to spend half as much a month to get back to center. It's important as a reader to forget about the dollar value above. That's just my own number. If you'd like to go on this journey with me, simply figure out what your normal spending range is, cut it down by 50%, and make a statement. Let's see if we can do it!
Readers, do you feel you have a natural spending limit, which once you go over, you start feeling uncomfortable inside? How do you course correct?
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”
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