Lessons from the Pros

Education Resource

How Not to Nickel And Dime Yourself Into Debt

The phrase nickel and dime yourself into debt sounds kind of odd, but it addresses a real problem for many. Namely, how small purchases that may only cost a few dollars, can add up quickly and contribute to your overall debt.  Those who are more prone to impulse spending tend to have a greater problem with this.

What Is Impulse Spending?

Impulse spending is commonly linked to emotions.  Most often people will impulsively buy something because it makes them feel better. People who are feeling down are more prone to impulsively buying things because it gives them an emotional boost.  However, I feel it can go both ways. For me, I’m more prone to spending money that I shouldn’t when I’m either in a great mood or a sad mood.

According to Ian Zimmerman on psychologytoday.com, “Some people possess a personality trait called an impulse spending tendency.” What this means is that people who have a harder tendency controlling their emotions will use buying unnecessary items as an outlet.

Impulse spending isn’t just an emotional issues, however.  It can also simply be due to poor spending habits such as not being able to keep track of purchases, especially items that are bought on a whim. In my opinion, one of the biggest causes of overspending are those small purchases that can be easily forgotten.

For instance, just last night I decided to go through a drive-thru car wash.  It was only six dollars, but by tomorrow I probably will have forgotten all about it and not have taken it into account in my bank balance.  It’s these last minute, unplanned purchases that can really put someone in a pickle. Tweet: Last minute, unplanned purchases can really put someone in a pickle. https://ctt.ec/g39eB+ Think about it, a twenty-dollar purchase multiplies to a couple hundred dollars quickly if you’re not careful.  That doesn’t mean you should never splurge or treat yourself, but if it becomes a habit and occurs more and more frequently, then there needs to be a way to restrain yourself.

Tips for staying out of debt.

Spending Habits That Will Help You Take Control of Your Money

Re-evaluate Your Budget

It’s easy to say you’ll only spend so much in one area, but when it comes to real life, it’s not so easy to stay within budget.  Make sure that after the necessary spending such as rent, food, gas, etc. are taken care of, that you have enough left for other purchases.  You have to take into account that gas prices are always changing and you might drive further one week than you do the next.  If you’re under-estimating the necessary purchases, then you’ll overspend if something happens that’s not planned out.  You should always budget more into those categories than you think you might need, so you don’t end up scraping pennies at the end of the month.  Then, if you don’t end up spending all that was budgeted, you have some extra money to put away in savings.

Use Cash

Allow yourself an amount to spend doing “fun” things and stay on budget by withdrawing that amount in cash.  It’s a great trick to make sure you don’t dip into your other budgeted categories for the month.

Access Free Financial EducationThis is great for two reasons.  First, because you’re not using your credit card, you can’t accidentally go over budget. Once the cash is gone, it’s gone and since you stayed in budget you don’t need to feel bad for spending it.  Second, spending cash is harder than swiping a card.  For many, it’s more emotional to see the cash dwindle down than the numbers on the screen of your bank account.  This is because you are physically spending the money. Don’t be surprised if you find yourself second guessing whether that purchase is really worth it.  Credit cards are easier and more convenient, so only using cash will likely help you stick to your budget, and might even stop you from buying something you don’t actually need.

Play the Waiting Game

When you’re out and about and see something of interest, instead of just impulsively buying it, maybe take a few days or even a week to think about it. If you’re still thinking of that item after a period of time, go back and buy it.  You’ll be surprised how often you will have forgotten all about it, proving that the item you absolutely needed in that moment, wasn’t actually a necessity.  This can be harder said than done, because in the moment you think you really want it.  This simple trick can save you a lot money.  But the great thing is, if you budgeted correctly and are only using cash for these types of purchases, then it’s not going to hurt you financially if you impulsively buy the item anyway.

Hopefully, if you’re prone to impulse spending or just terrible at keeping track of your money, these few tips will help you live a debt-free life.  These strategies have really been lifesavers for me because, not only did they help me manage my money better, they also taught me incredible self-control.  There’s nothing worse than looking at your bank balance and realizing you don’t have nearly as much money as you thought.  Stick to your budget, save your hard-earned money, and don’t let impulsive spending nickel and dime you into debt.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.