How To Become A Smart Spender. All You Need To Know!

Updated October 26, 2019

We’ve all fantasized about what we’d do with our own Scrooge McDuck money bin. (Come on…I know I’m not the only one)

But I’d wager that not many of us have planned how to get from where we are now (presumably without a money bin) to where we want to be (swimming in a pool of gold coins).

Well…according to all the wealth gurus it takes a combination of things. Knowing how to earn for starters. Knowing how to save and invest. And knowing how to spend…properly.

Getting your spending under control and becoming a smart spender is a critical element in building wealth.

Overspending and Us

Overspending comes so easy to many of us. And it’s not hard to understand why! After all, our modern society encourages consumerism. And if you don’t actually have the money in the bank, there’s always credit!

Don’t get me wrong, I am not against credit. But buying things on credit is a lot less psychologically painful that handing over a fist-full of cash. This is why it’s so easy to overspend with credit.

And it’s only possible for us to live beyond our means because we have credit readily available to use. 

We use other people’s money to buy our furniture, cars and dream homes without even thinking about the long term consequences. That’s not smart spending. That’s setting our future-selves up for a trip to Poverty Town.

You may be interested in:  Tips for Developing a Wealthy Mindset.

Potential Reasons For Overspending

The dangers of overspending aren’t news to most of us. But we still overspend anyway. Why?

Well, there are a number of potential reasons that each of us indulges in overspending. Some of the most common reasons are: 

1) We don’t make plans with our money:

You wouldn’t drive to a new place without a GPS, would you? Of course not! You’d end up driving around randomly, wasting gas, without any clue as to where you’re going.

The thing is, most of us do that with our money. We have an idea where we want to go, but we have no idea how to get there so we end up spending without a purpose.

And just to be clear, what I’m talking about is not having a budget. You need a budget because it serves as the GPS that lets you know how to reach your financial destination in the most efficient way possible.

2) Using credit cards too often:

Paying with credit cards is easy. As I mentioned before, it’s less painful than using cash and you don’t feel the consequences right away.

Another thing about credit cards is that many people underestimate how often they use their credit cards to make purchases. This lack of awareness drives people to use it more and sink themselves in more debt without even realizing it.

Pro Tip: Make sure that you check your credit score regularly. With Credit Sesame you can check your credit score for FREE. Having good credit makes the difference between getting approved or denied for that house or car you wanted. Or paying a lower or higher rate interest. Save money signing up for Credit Sesame.

3) We get emotional when buying things:

Many times our purchases are determined by our emotional states.

Emotional states cause us to buy more than we would otherwise buy. So, if you want to save some money then learn to avoid making purchases while under specific emotional states.

4) Not having enough savings

When you have nothing saved then a situation that could have been a molehill turns into Mount Everest.

It’s draining both emotionally and financially. And when your back is up against the wall you’re far more likely to swipe that credit card.

After all, you don’t have a choice, right?

But having to use loans and credit as a makeshift emergency fund is quite expensive. The interest rates that these companies require are high and can end up pulling you into a financial black hole.

The Negative Side Of Overspending

Damage to your Credit Score:

If you use a lot of credit to make your purchases, it’s highly probable that your credit score is going to take a dive.

You’ll end up raising your credit utilization rate and alerting the credit reporting agencies to the fact that you’re strapped for cash.

With the hit you’re going to take to your credit score you may end up exposing yourself to difficulties in the future.

Such as not getting approved for new credit, or having to pay a higher deposit for an apartment, etc.

Health problems:

It’s common sense that being sunk in debt can stress people out and cause anxiety. There is even evidence that debt is associated with adverse psychological health. 

Finance related problems can affect your health in different ways. It can raise your blood pressure, affect your immune response, or even your mood.  

And of course, being under excessive stress over time can cause more serious health conditions down the road.

In addition to all these negative consequences, many people consider putting their health care needs on hold because of costs.

It means that this can end up being a vicious cycle between causing possible poor health and the inability to pay for health care.

Money issues end up breaking many relationships:

When people face money problems the arguing becomes more and more frequent and is the main predictor of getting a divorce. 

The feeling that you live deprived:

Feeling that you live in deprivation can make you feel that you’re struggling just to survive. 

And that you don’t have the opportunity to enjoy things.

All the negative consequences of overspending should make it clear that smarter spending is the smarter option. Not only financially, but emotionally and health-wise.

Related Post: How to Buy Happiness and Make it Last.

Become a Smart Spender

Now, before you let all of that bum you out, you should know that all of those negatives are 100% avoidable. 

But you have to become a smarter spender. But what’s that? I mean, my idea of smart spending may be very different from yours or Warren Buffets.

Who decides what smart spending is?

You do!

Pro Tip: Buy the things you want and save money while doing it. If you are ready to spend less, then Ibbota  is your way to go. You can get CASH BACK buying in the stores you love. Sign up today and start saving more!

1) Designing a plan for yourself:

If you want to become a smart spender you need to come up with a plan.

Create a system that prioritizes your values and goals in order to give each of your dollars the perfect job to reach your goals.

In the end, it all depends on how well you plan, spend, and save your money.

2) Live Large on Less:

Often, we think smart spending means not spending at all. But this doesn’t have to be the case. It’s possible to buy and enjoy the things you like without breaking the bank. 

One of the strategies that really worked for us was adopting a frugal living style.

Being frugal helped us make better decisions and spend intentionally on things that we really care about. You can check our article about frugality here.

3) Maximize the value of every purchase:

Nobody likes to be deprived of the things they like. It could be your favorite brand of coffee or your subscription to the Wall Street Journal.

On the surface, these purchases may not appear smart, but it all depends on your point of view. Some of us may get genuine value out of the Wall Street Journal.

If you find the real quality of life value in purchase then it could be a very smart thing to do.

Taking Actionable Smart Decisions

1) Learn how to shop around:

Nowadays there are plenty of options that can help us save some money on every purchase we make.

You don’t even have to go to the store if you don’t feel like it. Plenty of well-known retailers offer discounts through their websites.

And free apps like Honey will even search for coupon codes to find you the lowest price while you’re doing your online shopping.

Take advantage of retailer’s sites and apps like Honey save time and money.

 In addition to shopping around. You can use free apps like Ibotta to save money on your in-store purchases.

We always check Ibotta before going to the stores. They have a lot of great offers and deals with some of our favorite brands.

They also give cash back!

So, if you’re looking for ways to cut down expenses we highly recommend that you use Honey and Ibbota.

You can sign up today for free and start saving money!

Related Post: What Money Means to You- 7 Clues to Your Money Habits.

2)  create a budget to get every dollar the right job

Creating a budget is one of the most basic steps you can take if you want to start making smart decisions with your money.

Budgeting is the road map that will help you decide how to allocate your resources better and make smart decisions about it.

If you want to learn how to create a budget you can check our article here.

But if still, you’re not sure if you need a budget, you can check out our article about why everybody needs a budget here.

3) Track your spending habits and create a plan for improvement:

Your money needs to be under control If you want to accomplish your goals.

But before you get your money under control you’ll have to get a clear idea of what it’s currently doing.

So get ready to start saving all of your receipts and putting them into Excel…

…I’m kidding.

You don’t need to track all of your expenses by yourself.

Most of you are too busy for that, or maybe or maybe bookkeeping just isn’t your thing.

Luckily there’s a free app for tracking your expenses, called Personal Capital. It makes things so easy and you can see everything in one place.

It is one of the most integrated tools when it comes to seeing what is going on with your money!

The best part is that Personal Capital‘s budgeting tools are totally FREE! It’ll show all your bank accounts and activity on one screen.

They even organize everything for you with graphs and charts. So you don’t have to feel worried or stress. It’s amazing! Try it out today!

4) Take steps to improve and maintain your credit score:

Doing things that will help you improve and maintain a high credit score will actually help you become a smarter spender.

Paying all of your bills on time, not maxing out your credit cards, and not opening a lot of new credit accounts suddenly are all good for your credit score. Likewise, they’re pretty smart spending decisions by most people’s estimation.

Maintaining a good credit score can also lower the prices you pay for things in the future. For example, maybe you are about to move to a new apartment or buy new furniture and you don’t have the cash you need on hand. In this situation having a good credit score will save you some serious money.

But don’t just cross your fingers and hope that your credit score is good. You need to check it occasionally. Even if you’re a smart spender, there could be errors on your report that are costing you money.

So make sure you check your credit score and keep track of what’s on your credit report.

There are some apps out there that give you an estimate of your score.

Credit Sesame is an app that will help you monitor your credit score for FREE.

But if you want to know your real score from the actual company that creates the algorithm check your credit score here at myFICO.

Related Post: How to Overcome Financial Procrastination.

Conclusion

Smart spending is not only important for you financial health. But it has a positive impact on your emotional and physical health as well. 

Take some time to evaluate your spending habits and adopt some strategies to help you on your way to becoming a smarter spender today!

Share with us  how many smart decisions you’ve made with your money. We’ll  love hearing from you.

Cheers!