Managing Your Expenses?: 5 Questions To Avoid Overspending
If sticking to your monthly budget is part of this year’s big financial plan, you probably know that unchecked spending here is truly the nail in the coffin of even the most carefully balanced budget. But, how can you put your expenses under control without being too inflexible or too loose? That is indeed the million-dollar question. In this post, I’ll share five filter questions you should ask yourself whenever you grab your wallet. Shall we dig in?
It’s the first week of the month and, with a carefully curated budget in your hands, you feel more prepared than ever. Everything goes according to plan… except that, a few days later, that special item you’ve been eyeing for months finally goes into sale. The worst part? The timing couldn’t be worse because now everywhere you look (and go) some random sale or shiny bright item is calling for your hard-earned cash. Now you finally understand why “cutting out unnecessary expenses” is the most catch-22-like financial advice ever offered.
But, Why Do You Spend? Uncovering The Patterns In Your Expenses.
Understanding your expense patterns is no simple feat. To do this, you need both time and willingness to dig deep into your assumptions and beliefs not only about money in general but also about your definitions of a Need and a Want.
If you are anything like me, you are probably quite familiar with the typical “old school” financial advice that asks you to only spend on things that are genuine needs (housing costs, transportation, service bills, etc). In this worldview, expenses that don’t cover an immediate need are seen as wasteful and, therefore, a splurge that you cannot truly afford.
While I do see the value that this kind of thinking may have for people who struggle to keep in check a series of compulsive spending habits, for the average person (aka, someone who doesn’t overspend all the time) being this radical can end up doing more harm than good, especially if your definition of a want vs a need is not crystal clear.
Five Questions to Ask Yourself Before Spending
This is where doing the work to figure out your spending patterns really comes into play. Although there are many ways to uncover your patterns, asking yourself intentional and thought-provoking questions has always been my preferred go-to method. Here are five things I like to ask myself every time something tugs at my wallet.
- Will this item truly enhance my life?
Before asking myself if I can afford the price tag (which, obviously, it’s also important), I like to get a sense of how this new item will fit into my life. For example, if I’m checking out a new kitchen appliance, can I confidently say that having this in my space will make my meal prep easier? Will I save gas/energy costs? Will I get back 20 minutes of my time? If the answers don’t really convince me, I’d rather pass.
- Do I need to buy anything else to “make it work”?
Or in other words: will this purchase entail additional costs that are not included in the price tag? The best example of this is cars. When you buy a vehicle (especially a used one) you have to factor in the gas and maintenance costs as well. Yes, paying $2,000 upfront may feel like an absolute steal today, but if you have to replace the transmission six months in, the deal might be worth some extra consideration. The same logic applies to services that require a subscription or the purchase of additional equipment to be fully functional.
- Is this the best use of my money?
This could mean two things. First, the priority-check meaning: do you have other pressing expenses to cover? Maybe you have booked a vacation and you have to pay off the bill before a specific date. Or maybe you need to buy a new laptop for your kids’ schoolwork. If you have pending commitments, ensuring that you can pay those off first is usually the best way to proceed.
Second, the literal meaning: is spending your money on X thing truly the best use of it? Let’s say you are thinking about buying a new spring jacket… except that you have an almost brand new jacket, bought one year ago, which you have not really used much. Is spending on a new jacket the best use of your money? Only you can tell.
- Can I get by without it for a while?
If you were to walk away from the store today without making any purchases, would you be able to get by? Sometimes, the answer is a resounding no (like the time the glass jar of my coffee machine completely shattered and that meant no coffee the next day! #heckno), but sometimes the answer may be a (muffled) maybe. If the latter applies to you, try walking away without buying today, but saying to yourself you’ll come back for the thing the next day. If you truly want the item, you’ll be back at the store in no time.
- Can I really afford this?
Last but not least, the decisive question: if this item is not a real need (or doesn’t feel like it), can you afford it without going into debt? Can you afford to pay off this thing today without straining your current finances? If the answer is no, you might want to re-evaluate your desire. Go back to question 4 and give yourself a day (or two) to consider. The result may surprise you!
Wrapping Things Up: Managing Your Expenses Requires Intention
Although these are simple, no-frills questions, asking them every time I’m about something that doesn’t fall in the strict “need” category has helped me develop self-awareness and a deep understanding of my likes, dislikes, and wants. If you pair these efforts with a careful observation of your typical buying behaviors, you will be well on your way to understanding how you spend and why.