I’m at an age where I’ve started taking my finances more seriously. I don’t tend to indulge in unnecessary spending and I take great pride in my monetary restraint. But that all goes out the window as soon as Winter approaches. It’s almost comical how one of the most joyful times of the year causes so much stress. Between the gift buying, traveling, hosting, food and décor, my poor wallet sits there and weeps.
But here’s the thing: I never intend to overspend. I set myself a budget well in advance but I somehow always end up blowing it. There’s just all this pressure that I’ve built up in my head to find the perfect outfit or gift and there’s always some kind of last minute shopping that needs to be done. It also doesn’t help when retailers lure me in with their nifty markdowns and generous discount codes. My self-control is truly pitiful. Soon enough, every little thing starts adding up and I can feel myself drowning in remorse when I log in to my bank account.
And I’m not the only one. More than three-quarters of consumers overspend on holiday purchases, according to TD Bank’s 2017 Merry Money Survey. And it’s not just overspending by $5 or $10. The average American spends at least $263 more than expected.
If you’re anything like me, getting your finances under control after the holidays might seem like a mammoth of a task, but it’s not impossible. It all comes down to fostering a cognisant relationship with your spending habits and your earnings, which takes time, discipline, and budgeting. I’ve learned that it’s all a matter of progress and it’s a paradigm of mind over matter.
With the much–needed help of personal finance pros, I’ve begun to prioritize my expenditure in such a way that I can now continue saving for my future. The best part is, I don’t feel like I need to compromise on having fun.
Keep reading to discover how exactly I’m doing it.
Assess the Situation
Before you do anything, take some time to evaluate why you might have overspent in the first place. Knowing this is crucial because you can prevent it from happening again. Print out your bank statement and sift through any receipts to determine where you may have gone overboard. It’s a good idea to jot down all your holiday-related expenses so that you can plan your budget more effectively for next time. It’s a learning curve and proactively assessing your outgoings is a positive first step.
Go Back to Budgeting
Having a budget is a great way to keep track of your finances. I used to be rubbish at budgeting, but I’ve found that the 50-20-30 rule really works for me and it’s easy to implement. As per this rule, fifty percent of my monthly income covers basic needs, like food and rent. Twenty percent goes to my future savings. And thirty percent is for fun.
Holidays are an expensive time of the year, so don’t be too hard on yourself if you spent more than you hoped. Just tweak the percentages to compensate for the extra expenditure. This might mean forfeiting that take-out coffee or those boots you had your eye on to ensure you have enough money to pay for less flexible expenses like your bills. It’ll beat having to take out a loan!
Take Care of Any Debt
Paying off debt is just as important as investing for the future and it can be hard to prioritize one over the other. However, since we’re trying to regain our financial footing, it’s wise to eliminate any “bad debt”, such as credit card debt, before it snowballs. To do so, you’ll need to craft a cohesive repayment plan that’ll replenish your savings in due time. You can also look into transferring your credit card balances to a 0% interest card which might speed up the process.
Or better yet, avoid using your credit cards altogether. I find that taking them out of my wallet reduces any temptation. After all, out of sight, out of mind.
Consider Your Payment Options
There’s just something about physical, paper cash that makes me far more conscious about what I’m spending. I can confirm that the psychological influence is real. Using cash is a great way to be more mindful of your outgoings which in turn will help you stick to your budget. Before switching, it’s best to figure out which areas of your overall expenditure are better suited to this type of payment.
Personally, I’ve started reserving cash for groceries and clothes since I know I overspend on these things. Remember, forgo the credit card if you don’t think you’ll be able to pay off the balance in full each month.
Freeze Any Frivolous Spending
If you’ve really gone to town with your expenses this year, maybe it’s time to freeze any frivolous spending for a few days. This is highly beneficial in theory but extremely challenging in practice. It takes major willpower, but it means that you’ll truly hit the reset button. There’s nothing like a little short-term pain for long-term gain.
If going cold turkey seems improbable, you can keep yourself from spending by investing. It’s a much better use of your money and your future self will thank you. At first, investing might seem scary. I for one found the whole concept overwhelming and I had no idea where to begin.
But I turned to Ellevest which has been a complete blessing for my fiscal well-being. Ellevest is a digital investing platform made by women, for women, that uses tailor-made algorithms for your lifestyle. It only took me 10 minutes to sign up and I didn’t even need a minimum investment or balance. So easy and I know I’m doing something good for my future.
Make Investing Automatic
The easiest way to save? Make it something you don’t even have to think about. If you’ve already set up an automatic savings account but want to do more for your future, robo advisors like Ellevest may be your answer.
Unlike your typical human financial advisor, robo advisors are automated platforms that create tailored investment portfolios based on your financial goals and comfort level. These platforms make it really easy to invest online. They do the research for you, and if there’s a change in the market, the platforms automatically update to optimize portfolio performance. Genius.
Regardless of how you decide to invest, the habit of investing will likely benefit you in the long run. I know it’s scary to think about investing, especially if the market is volatile, but you have to remember: it’s important to not react to the market. When the market falls, your instinct might say to sell and cut your losses. If you do this, you will never give it the chance for it to go back up and ride that wave. In addition, similar to setting up your credit card on auto-pay, set up automatic investing every month. Investing isn’t a one and done kind of thing, and if it is automatic, you won’t even miss it.
Lastly, if you want to retire, you have to invest. Whether it is through your 401(k), IRA, or your own personal investment portfolio, you need money to work for you, rather than only you working for it. Get started today.