Consumer spending accounts for about 70% of the U.S. economy according the U.S. Commerce Department. Our spending is what keeps our economy in either good or poor shape. When spending increases or decreases, it has a major effect on our economy.
What we buy can be divided into two major categories. The first category would be necessities which would include food, housing and clothing. The second category is referred to as discretionary spending – the purchase of non-essential goods and services.
What effect do your spending habits have on your own personal finances?
Here are a few simple tips to help make sure your spending habits aren’t hurting you financially:
- Each and every time you make a purchase, ask yourself – do I need this item or do I want this item? If it is a need versus a want and your budget allows for it, then by all means go ahead and make this purchase. If it is a want item, spend some time determining whether it will benefit your life. At this point you should decide if this want is really worth over extending your budget.
- Start by using cash only. Leave your credit card in your wallet and take it out to use only in an emergency. If you don’t have the cash and can’t use the credit card, you won’t overspend.
- We’ve all made the mistake of running into a store for just a few items and instead come out with bags of stuff we didn’t intend to purchase. A great way to avoid this common impulse buying mistake is to make a list and stick to it. If you are tempted by something extra, make a mental note and get it next time. By then, you may find living a week or two without this item makes it unnecessary. Just imagine what you could save by following this rule alone.
- Set a future goal, whether it is an exotic vacation, a huge retirement fund or working your way out of debt. Now every time you go to purchase a non-essential item remind yourself of this goal. Take this money and put it towards your goal. Before you know it, you could be relaxing on a tropical island or sitting on a very nice nest egg.
- Make your budget and decide how much money is fun money. Go ahead and enjoy spending this set amount. Just remember when you reach your limit STOP!
Carefully planned spending helps our economy as well as our personal finances. Remember to shop responsibly and keep the state of your financial future always in mind.
Answers from AZ