We all know that financial planning is important to ensure that we achieve our financial goals. Many of us also have a financial plan in place and ensure that we take the steps outlined in it. Some of us have professional advisors who draft a plan for us and regularly revise it as required.
But we have to be careful on our expenditure so that we do not go overboard without realising it. Sometimes we spend without proper thinking and splurge on items that are not really needed. Sometimes many small purchases add up to a large amount, leading to a mess in our finances. This causes imbalance in our budget and financial plan. Many times we realise the mistake very late. The splurge that we do may not be that rare an occurrence that we think it is. Here are common ways where we end up spending more money than estimated and some ways to curb overspending and staying within the budget limits –
Credit Card Usage – Credit cards are great for purchasing. You go to a mall, like something and want to buy it. If you do not have cash with you, it is fine, as a credit card will allow you to buy now and pay later. It seems like a great option but if you are not careful, the credit card bills will rise faster than you can pay them off and then you have problems with interest charges and timely repayment. One should try to use cash or debit card and use credit card only for emergencies. Using cash makes you aware of your spending rather than card usage.
Temptations – People around you in your real world and virtual world seem to be having the time of their life going to fancy restaurants, latest movies, buying the latest gadgets and taking vacations in exotic places. You are also tempted to do what everyone else is doing and yearn to do the same. But before you go ahead and enjoy all the pleasures of life, take a look at your plan. Ensure that you do fun activities within your budget. This will ensure that your financial future is secure.
Impulsive Purchases or Overindulgence – When we go shopping, it is easy to buy fancy, expensive things that please our eye. This is definitely not good for your financial plan. It is better to plan your purchases by simply making a shopping list. Before you go for your weekly shopping jaunt or an impulsive shopping stroll, make a list of things you need to buy and ensure that you stick to it. Of course indulgence in a couple of items once in a while feels good but if indulgence in itself becomes a habit, it would become expensive and turn the budget topsy-turvy.
Personal Loans for Excess Spending– Personal loans are advertised heavily. They also have “attractive” schemes that are bombarded to us in different forms of communication. It is very tempting to take a personal loan for the vacation you have been dreaming about or the luxury car that you want to buy. But it means you are paying much more than what is really the price of that indulgence. Think hard if the expenditure is really required NOW or if it can be postponed or be substituted with something within your means.
Other Unnecessary Expenses: Sometimes, your regular day to day expenses may also not be really necessary. For example, take a relook at your cable subscription, call plan and internet usage plan and decide if it is really the best plan for you in terms of expenditure and usage. You may find in many cases that the current expense you incur is not need and there is scope for optimization.
Ensuring that money is not lost unnecessarily requires a little bit of research, and discipline. Once you practice it for some time, you can always find new ways to check your spending. This will ensure that you are not caught in a tight spot. #gettingyourich