Wednesday, 18 September 2019

A guide to building financial self-control



We are living in the age of credit, with probably as much as 95% of the population in debt to some degree. Mortgages, car loans and credit cards are all things we have, and without some restraint, it is very easy to end up paying out more than you are earning. Carrying a few pieces of plastic in your wallet really does empower a person, and it is quite a responsibility when you consider that we are constantly bombarded with tempting offers, all designed to relieve us of some of that hard-earned cash. If you find it difficult to resist spending, here are a few useful strategies to help build self-control.

Understand the difference between needs & wants
Sometimes the line between a need and a want seems very fine, but if you ask yourself this question, “Is it absolutely essential that I have this?” prior to purchasing anything, this can remind you that it isn’t the end of the world if you wait until your finances improve. It isn’t always as straightforward as that, as you might be about to spend a small amount that will actually save you money in the long run, and in such a case, you are better off making a small investment that will reduce your outgoings.

Cash only purchase rule
While this can be a little inconvenient, paying for something in cash really does help you to remember that you are spending money and not signing a receipt, so maybe you should avoid using your credit cards for a while. Some people end up with several large credit card bills that they struggle to pay, and when that happens, there are online debt management services that can help you to clear outstanding credit card bills by taking out a debt consolidation loan. This type of company can also help you plan debt management, and they have helped thousands of Australians to become debt-free.


Plan a daily budget
This is time-consuming, but if you work out how much you can spend on a daily basis, then that is your budget limit and by keeping track on every expense you have, this can help you to budget for the month. If you are tempted to buy something that you know you should not, remind yourself what would happen if you were unable to make every payment and had to pay interest on the card payments, and that should give you some motivation. There are informative articles available online that offer ten strategies for developing financial self-control, which is recommended reading.

If you know yourself well enough to understand that you are easily tempted with credit cards in your pocket, leave them at home and make a decision that you will only use the credit cards in an emergency. Some people even cut their cards in half, but if you do that, you have no emergency funds available, so it is better to store them somewhere safe and only use them when it is absolutely essential.

By analysing your spending, you can identify areas where you are spending more than you should, and keeping track of expenses will give you a heads-up when you cross that line and are spending more than you earn.

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