Our country has a spending problem. According to the Center for Financial Services Innovation, almost half of Americans say that their expenses are equal to or greater than their income.
If you’re living paycheck to paycheck or spending more than you earn, it’s easy to blame credit cards, low income, or emergency expenses for your problems. But in most cases, these things aren’t the issue — a lack of spending discipline is.
5 ways to develop more spending discipline
If you want to more than just get by, developing spending discipline can be your first step toward achieving your goal. As with any other habit, it takes time and effort. But before long, you’ll start to see changes in your ability to save and to start working toward achieving financial security.
1. Define your motivation
Money in and of itself isn’t a very good motivator. So, it’s important to understand what achieving financial security means for you. For me, it means having the freedom to do whatever I want. Whether it’s traveling, writing a novel, or spending more time with my family, I want the freedom to decide for myself how to direct my time.
Here are just a few other examples you might consider:
- Serve multiple missions after you retire
- Quit your job and do something you love that might offer less stability or a lower pay
- Start a nonprofit organization
- Have more money to spend on hobbies
- Retire early
Whatever it is, it’s important that you decide what you want out of life, and how being more disciplined in your spending can help you get there. It’s possible that your motivation can change over time, so be willing to be adaptable.
2. Set meaningful goals
Now that you have a better idea of what you want, define it better by setting short-, mid-, and long-term goals. For example, one of our goals is to contribute at least 10% of my income to my 401(k) and to max out my IRA every year. It’s been a goal for years, and I think we’re finally going to reach it this year.
We also set a goal to pay off all of our non-mortgage debt to have more money to save each month.
These don’t have to be your goals, but it’s important to set ones that are meaningful to you and motivate you to keep going. It’s also important to prioritize your savings goals based on your overall vision.
3. Create a budget
Only 41% of Americans follow a budget, according to a 2016 study by U.S. Bank. But this most basic financial planning tool can make a big difference in your life.
As Spencer W. Kimball once said:
Every family should have a budget. Why, we would not think of going one day without a budget in this Church or our businesses. We have to know approximately what we may receive, and we certainly must know what we are going to spend. And one of the successes of the Church would have to be that the Brethren watch these things very carefully, and we do not spend that which we do not have.
There’s no right way to budget. You can use an Excel spreadsheet, budgeting software like Mint or You Need a Budget, or just plain pen and paper. Don’t be afraid to try a few options to find out which works best for you. The important thing is that you set guidelines for how you spend your money and avoid overspending on things you don’t need.
Here’s a great budgeting guide to get you started.
4. Track your spending
It’s not enough to set spending goals. You also need to track your spending throughout the month to make sure you stay in line with those goals. For this part of the process, it makes sense to use budgeting software because you can usually import your transactions from several accounts into one place. Then you just have to categorize each one to fit within your budget.
I typically track my purchases once a week at least. That way it’s harder to forget what I spent the money on.
5. Evaluate yourself honestly
Each month, take a look at how you spent your money versus how you wanted to spend it. This is a great time to hold yourself accountable for your actions. If you overspent in some areas, it might mean that you need to cut back, or it might mean that your spending goal was too low.
Be honest with yourself here. After all, the only person you’re hurting with a lack of spending discipline is yourself.
The bottom line
By taking these steps, you’ll not only be able to save more for a rainy day, but you’ll also be able to set more aside for your short-, mid-, and long-term financial goals.
What’s more, you’ll be able to use any type of payment method without being concerned about the temptation of overspending.