Are you a saver or a spender?
Do you see something you want and plan how much you need to put away each week to save up for it?
Or is your first impulse to whip out your credit card – and worry about whether you can actually afford it later?
Impulse buying can be one of the biggest black holes in your budget and one of the real killers when it comes to taking control of your cash flow.
You many want it all – and you may want it now – but unless you’ve got Freddie Mercury’s royalty cheques rolling into your bank account, it’s not a case of what you want, but what you really need.
This may seem likely a pretty obvious budgeting tip, but think about the purchases you made during the past week, or even the last month.
How many of them were impulse buys? How many of them were based on your wants, rather than your needs?
Brands prey on our innate desire for the latest and the greatest – and our corresponding lack of will power – in order to sell their products.
Take Apple for example.
When the tech giant launched the iPhone 7 in September last year, people camped out overnight (some for days) to be among the first to get their hands on the latest bit of tech gear.
Those people were probably the same ones who also waited for hours in line the year before when the iPhone 6S came onto the market.
In fact, Apple has launched a new version of its popular smartphone each September for the past five years, with rumours the “long-awaited” iPhone 8 will come out with even more fanfare than usual this September as Apple marks the 10th anniversary of the first iPhone.
How many us that get a little bit too excited at the thought of yet another iPhone upgrade will move on to what could be a sixth phone purchase in as many years? Is it worth it? Have the constant updates significantly improved our lives and levels of happiness? Or have they merely left a burning hole in our bank accounts that even Siri can’t fix.
Is it a want, or is it a need?
Ask yourself the question every time something catches your eye on the shelves or in a catalogue. After all, it’s no good identifying all your income and expenses, and putting them together in a kick-ass little spreadsheet if you’re going to blow the budget every time you walk into a shopping centre.
When I find myself in this situation, I try to stop – take a deep breath – and think about all the other things I could do with the money. If we use the iPhone as an example, spending $99 a month on a phone plan over 6 years is a ton of money!
Over a 6 year period that is $7,128 that can be used to make extra payments off your mortgage, saved towards your children’s future education needs, or invested into a savings plan that will help you grow your family’s wealth.
Beware as well the temptation offered by online shopping – it’s a real devil in disguise. The convenience of being able to buy something from the comfort of your own home can mask the fact that if you actually had to get into your car and drive to the shops to make the purchase, you probably wouldn’t bother.
After reading this article, you may want to ignore me – but you need to put this simplest of budgeting tips into practice if you truly want to get your cash flow under control.
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