I am passionate about helping others accomplish far more than they ever thought possible with their personal finances. I know that the number one way that folks will win with their personal finances is to have a well-written plan and clearly defined goals. Setting financial goals will help you stick to your budget, and ultimately win with your money!
Step 1: Write Down Your Financial Goals
I once read this Chinese Proverb – “The faintest ink is sharper and longer lasting that the brightest mind.” That is so true! When I write down something, I am much more likely to recall it!
Here are some things that can help stimulate your goal writing.
- My book 20/20 Money is about funding your dreams. It helps you explore what your plans, hopes and dreams are. Then I help you figure out ways to fund your dreams beyond your regular income. Pick up a copy from the IWBNIN store.
- If you use Microsoft Money or Quicken, print out an Income & Spending Report for the past year. What needs changed? What should be continued? What should be done even more?
- Is there something in your finances that is REALLY bothering you? Many people have one thing that really bothers them. What is necessary to make it stop bothering you?
Write down your financial goals. We offer a FREE TOOL to help you do just this! You can download a copy of the Financial Yearly Goals sheet [HERE]. Why not do it right now? You don’t have to wait for the new year. In ten minutes or less, you can have your financial goals written down on paper!
Step 2: Put A Completion Date Next To Each Goal
“Fail to plan. Plan to fail.” A plan is not complete without assigning a completion date next to it. This date will help hold you accountable to yourself!
Here are some questions to ask yourself as you look over the goals you have written down and assign expected completion dates.
- If you are married, are you and your spouse on the same page with these financial goals? If you are not on the same page, this will be VERY difficult!
- Do any goals rely on another to be completed first? (For example, if you are paying off two credit cards – does one need to be paid off before the other?)
- Are the goals mildly realistic? Ridiculous goals tend to demotivate and demoralize. Make sure the goal has a good fighting chance of being accomplished! On the other end of the scale, don’t be too easy. Be sure to stretch yourself some!
- Are any goals higher in priority than others? If so, be sure that they are identified as such!
Step 3: Remember Your Financial Goals
There have been times that I have placed my goals in a drawer. This is NOT good! Here are some tips for ensuring your goals are kept in front of you through the year.
- Schedule a task or reminder on your email or phone calendar that will give you an alarm on the date that the goal is expected to be completed.
- Schedule another that beforehand that’s titled – “Review your Financial Goals.” This is REALLY EFFECTIVE if you actually include your Financial Goals on the reminder. That way, the excuse of “I don’t have my goal list with me” is totally removed!
- Place the goal list in front of you at work or on the refrigerator. Place it somewhere that is very visual and will be seen often!
- Tell others about your goals! That is great accountability!
- Start a blog and share your goals with the world! People like Jonathan at My Money Blog and the lazy man at Lazy Man and Money are sharing their personal financial picture with the world! It makes me wildly uncomfortable to see their net worth, but I can’t stop reading their blog!
Step 4: Establish Accountability
You are doing great! You have written down your goals, established a target completion date for each and set up ways to remind yourself of them. Now comes the really hard part … accomplishing the goals!
I have found that there is nothing so effective as personal accountability to ensure that a goal is accomplished. Who is in your life that you really trust and wants to see you achieve your goals? If you are married, your spouse should certainly hold you accountable! If you are not married, who could you ask to hold you accountable? Married or not, it is very effective to ask those you love and trust the most to hold you accountable.
I have a friend who holds me accountable to my financial goals. About once a quarter, he contacts me to see how I am progressing toward the goal. I would hate it if he called and I have made no progress! It helps me stay focused!
You may have different people hold you accountable for different goals. For instance I’ve had a person hold me accountable for my stock investment goals and another for my real estate goals.
Why don’t you take some time right now to determine WHO will hold you accountable for each of your written goals?
Step 5: Take Action!!
I have a quote that I say regularly. It came to me after having been caught in one too many horrible, pointless, useless meetings!
“Thoughts and talk without action are mere babble!”
Enough of the planning. Enough of the talking. It is time to make it happen! Nothing moves until it is shoved. Attack the goal.
It is TIME! What can you do right now to achieve one of your financial goals? Perhaps you can start off you can accomplish one this month!
Call and set up the appointment with an investment broker. Go ahead and get the new insurance quotes. Chop up the credit cards. Close the credit card accounts. Sell the truck. Go to the TOOLS page and put together your first-ever INCOME – OUTGO = EXACTLY ZERO budget!
I end this post with a great quote from Will Rogers …
“Even if you’re on the right track, you’ll get run over if you just sit there.”
– Will Rogers
Do you ever get caught in the cycle of “see it, want it, and buy it?” Before you spend you don’t stop to think through your purchase. Now you not only have a new gadget that’s all yours, but you also have a high monthly payment to go with.
It is my hope that this post will help provide you with practical questions to ask before you spend a substantial amount of money. Practical questions that will help you truly understand the enormity of the decision, and help you make the decision that is best for you and your family.
Question 1: “Do I need this?”
This can seem very basic, but as a “spender” I can get caught up in the “I WANT THIS!” moment and never stop to ask, “Do I need this?”
My garage is full of “I WANT THIS!” items that we never use. EVER! This includes a RC Airplane (it’s cool – but I don’t use it), bike (never ride it), tennis rackets (once every three years – not a priority), and many other items.
Pausing to ask, “Do I need this?”, can prevent a lot of poor spending decisions. I’m not saying that I never purchase things that are pure “wants” – I am saying that when I ask the key question, I make much smarter overall decisions.
This question becomes a “gate keeper” of sorts. Something to help prevent impulsive spending. If you are an impulsive spender, and need help to stop check out this post [HERE].
BONUS: Wait overnight before answering the question! It is amazing the clarity that a good night of sleep will bring to a spending decision!
Question 2: “Will this item INCREASE or DECREASE in value?”
Asking this simple question can prevent a lot of poor spending decisions!
Chewing gum goes down in value. So do cars, 4-wheelers, refrigerators, swimming pools, and clothes.
Businesses can go up in value. So can houses, land, antiques, mutual funds, company stocks, bonds, and intellectual property (patents, licenses, etc).
Here is what I KNOW: Not all of your purchases can be for items that increase in value, but if ALL of your purchases go down in value – something ain’t right!
BONUS: Find someone you know who is prospering with their investments. Invite them to lunch (pay for his/her lunch) and ask them to mentor you! They will probably LOVE IT!
Question 3: “Do I have the money to pay CASH for this item?”
I got to write the “I Was Broke” part of my book, I Was Broke. Now I’m Not. (you should buy a copy HERE) by always financing stuff. My car, truck, next truck, engagement ring, wedding ring, honeymoon, credit cards, college student loans, furniture, and many other things were financed because I did not stop and ask myself this key question. I know that the day I started asking this question was THE DAY that my family started winning with money.
If I do not have the cash to pay for it, I’m not buying it UNLESS it is a house or an asset that will increase in value (like a business, rental house, etc). Even then, the answer is still usually “NO!” unless I have all of the money available to pay cash.
Question 4: “Will this purchase generate income for me or take income away?”
What an incredible question to ask – and what a difference it will make in the way you think about money! I used to earn money and then immediately begin pondering which fun item I was going to buy. I rarely (if ever) thought about the fact that I could use the money to buy in to a small business, purchase stocks and mutual funds, start a small business or purchase a rental home.
Even more, I did not truly realize the ACTUAL cost of many of the items I had purchased. I had purchased a new car (my smokin’ hot Chevy Cavalier) and I only thought of the bank loan as my “cost” to purchase. In actuality, I also added the costs of insurance, property taxes, license tags, maintenance, repairs, and additional gasoline consumption. Not to mention the lost potential to make money with what I was currently sinking into all the bills associated with that car.
Before you spend, just stop and ponder the options available to you to use those resources to generate more income for you in the future.
BONUS: Review your budget to see how much your current possessions are costing you on an ongoing basis. There are many purchases that are “gifts that keep on giving.” By looking at things you’ve already purchased, or subscriptions you already have, you can find ways to lower your expenses.
Question 5: “Will this help me achieve my future plans, hopes, and dreams?”
I believe that the number one reason that people fail with their financial plans is a lack of organization and the lack of a plan. One of the best ways to plan your finances is to budget each month. To learn more about budgeting check out this post [HERE]. Budgeting is planning where you spend your money with you long term goals in mind.
Without a longer-term perspective, it becomes extremely easy to fall into the trap of living for the minute, and immediately spending every single dime we earn. As one develops a longer-term perspective, it really helps us recognize that spending all of our money right away will rip our future dreams away from us!
When my family first got started on improving our financial future (Dec 2002), I noticed that we started looking a few months ahead. Now, eighteen years later, my entire perspective has shifted. You see, I want to leave a legacy for my children and community. I want to leave a huge inheritance to my family, church, and others. My wife and I want to give our children a paid-for college education. We want to give them a paid-for house when they graduate. We desire to teach them to manage their finances recognizing that it is not just FOR THEM, it is FOR THEM TO HELP OTHERS!
I’m 46 right now. Statistics say I am over 1/2-way through my life. Time is short. Too short to spend all of our resources on stuff that does not support our plans, hopes, and dreams.
This is also why I wrote the book 20/20 Money. I wanted to walk you through practical steps you can take to not only discover, but fund your God-given purpose. Too often I see people buy into the lie that their big dreams aren’t possible because their income just won’t support it. My book is about helping you move forward to live a Fully Funded Life.
So Before You Spend…
THINK! Think about what this big purchase means. Not just the temporary gratification, but how it will impact you in the long run.
My hope is that by slowing down and asking yourself these questions you will be able to gauge how important a large purchase is to you, and how it will benefit you. You will make fewer, more meaningful purchases. You’ll still get to indulge in some “I wants,” but you’ll notice there will be less times that you spend money on something and wonder later “Why did I buy that?”
I have found that a vast majority of those who sign up to attend the Financial Learning Experience are living paycheck-to-paycheck AND carrying debt. In fact, statistics from surveys I have conducted show that 72% of those attending my classes are living paycheck-to-paycheck. Of those 72% living paycheck-to-paycheck, 24% are BEHIND on payments.
Only 3% felt that they are doing well financially.
This is a NATIONAL problem. No matter where I go, I see the trappings of debt – marriages failing, stress, depression, and hopelessness. And all of this is happening in one of the wealthiest countries on the planet! This is entirely unacceptable!
So, as part of my crusade to help America become debt-free, I am going to share the process I followed to become debt-free.
Before I get started, I want to ask you these questions.
- Would you join me in my crusade?
- Would you share this with others?
- Would you commit to become debt-free?
I WANT YOU TO BECOME DEBT-FREE!!! It changes your life! It enables you accomplish far more than you ever thought possible with your personal finances! It allows you to go do exactly what you were put on earth to do – regardless of the income!
Step 1 – Understand WHY you want to be debt-free!
I believe this is the most important step in becoming debt-free! In the hundreds of financial counseling sessions I have held, it is amazing how many people do not have a plan for their lives.
I ask them, “Why do you want to win with your money?” and they stare at me like I am from outer-space.
“Why?” they stammer back at me.
Seriously, I believe that it is the first time that many of these people have ever seriously thought about what they want to accomplish with their lives. As a result, they are bumbling through life just “trying to make it through the day”.
What a miserable way to live!
I cannot overstate this fact – IF YOU AIM AT NOTHING, YOU WILL HIT IT EVERY SINGLE TIME!
Write out your hopes and dreams.
When Jenn and I wrote down our hopes and dreams on paper it opened our eyes to the fact that our money management (or lack of) was literally ROBBING us of our future! We wanted to move back to Anderson, SC to take a job that paid way less than what we were making, but every single dinner at Outback was robbing us of that opportunity. Every single debt payment went off to make the bank wealthy while at the same time robbing us of our God-given dreams!
That made me MAD! It made me FURIOUS! It made me realize how incredibly STUPID I was to be managing our money so crazily! I had $755 PER MONTH going out to pay car debt, credit card debt, and student loan debt. Add in the stupid house payment, and I had over $1,700 per month running off to make the bank wealthy!
By writing out our hopes/dreams on paper, Jenn and I were motivated to manage our money differently. It caused us to view debt differently.
Are you ready to get rid of your debt?
Take your first step today by print out THIS FORM and filling out your own hopes/dreams. If you are married, you need to do this separately and then take time to discuss it with each other.
By the way, one of my hopes/dreams is for you to become debt-free!
What has kept you from attacking your debt?
Step 2 – List your debts.
During financial counseling sessions, it is a guarantee for any person who has debt that I will calculate their debt freedom date. You should see people’s reactions as I put together a list of their debt! Their reactions relay to me the true facts of debt. Here are some very common reactions that I see or hear.
- Hiding their eyes
- “Oh no!”
- “I’ve never added it up.”
- “This is scary.”
- Moving to a defensive position as if to guard themselves against the debt
- Turn their head so they don’t have to look at the debt total
I KNOW that it can be scary to total up debt. The mere fact that it is so scary tells me two things:
1. People do not like debt.
2. People have not been paying attention to their finances and do not have a well-defined plan for their life. Otherwise, they would not have incurred most of the debt. It is literally ROBBING them of their financial future!
Here is what I say to them – “If you don’t know how many heads the dragon has or how large the dragon is, how can you effectively defeat it?”
It is time to slay the dragon. Use THIS FORM to prepare a well-organized list of your debt.
Why is it so scary to total up debt?
Step 3 – Calculate your debt-freedom date.
It is really very simple to calculate your Debt Freedom Date. You need two numbers to calculate your Debt Freedom Date – Total Debt Owed and Total Monthly Payments. I pretend that there is actually only one debt – with one big balance and one big monthly payment.
Look at the sample debt list below. This family will be debt-free in just 33 months!
In the TOOLS section, there is a free tool called the Debt Freedom Date Calculator. If you enter your debts and monthly payments into this tool, it will calculate your Debt Freedom Date for you! If you don’t have Microsoft Excel, click HERE for a web-friendly version.
How many months until you are debt-free?
Step 4 – Establish accountability to become debt-free.
The strongest among us can still fall to temptation! You could be making fantastic progress toward debt-freedom and then a new truck pulling a new boat passes you on the road. If you are not careful, you will also be pulling a new truck and boat down the road!
There are two key ways to ensure you are held accountable to your goal of debt-freedom!
If married, work together with your spouse. If unmarried, have someone you trust (someone who has won with their money) hold you accountable!
There is incredible power when you work together with your spouse toward debt-freedom! It is a common goal that will unify your marriage and cements your commitment to managing your resources together.
I have also found that when I have a bad case of the “I Wants” and “I Gotta-Have” Jenn does not. She shuts me down! Then, when Jenn gets a bad case of “I Really Want This” I do not. I shut her down! Why? Because we are not doing debt! We are THROUGH with it!!!
Plan your spending every single month!
Planned money goes farther than unplanned money! Every single month Jenn and I sit down TOGETHER and spend every single dollar on paper before we are paid. Don’t miss that – that was good! Every. Dollar. On. Paper. BEFORE. We. Are. Paid.
From the day that Jenn and I started budgeting, we have not incurred any new debt. In fact, we became debt-free (minus the house) in just 14 months!
I can tell you this. I HATED the idea of budgeting and now all I do is yell from the mountaintops about how important it is and how EZ it is to budget! There are FREE budget forms that are available HERE. Use one of them to start your journey to debt freedom!
Your budget will hold you accountable. I wouldn’t be surprised if it helped you free up $200 – $500 per month to attack your debt even harder. It did for me!
If you’re already debt-free, how did accountability help you stick to your debt-freedom plan?
Step 5 – Secure your debt-freedom.
Save at least $1,000 before attacking your debt!
I have seen so many people calculate their Debt Freedom Date and get all fired up about attacking their debt. They sell everything and everyone in sight. They can’t shut up about getting out of debt. It is all they talk about with their spouse. They have even sold their Clay Aiken AND Celine Dion albums!
Everything goes great for two months. They smile every time I see them. “This is awesome”, they tell me enthusiastically.
Five months later, they avoid me. When I ask them what is up, they say something like, “Well, Johnny broke his arm and the emergency room bill and doctor bills cost me $1,500. I had no savings so now I am right back where I was – falling back into more debt.”
How demoralizing is it to attack debt so fervently and then have to go right back into debt? It is AWFUL! Don’t do that! Instead, save up at least $1,000 into an emergency fund before attacking your debt and THEN you can attack your debt all you want!
What happens if you have an emergency pop up while you are attacking your debt? You can use the emergency fund to cover the expense. To replenish the emergency fund, slow down on the debt pay-off plan until you have the $1,000 back in the emergency fund!
By the way, if you have a house, kids, or more than one car I highly recommend $2,500 for your emergency fund.
Secure your debt freedom plan with your emergency fund!
Congratulations! You now know the process that Jenn and I used to become and STAY debt-free! You are now equipped!
What are you going to do now that you are equipped to become debt-free?
You can be debt-free!
I want to equip you to become debt-free! Jenn and I became debt-free in 14 months by following this process, and I can tell you this – there is NOTHING like living life without the trappings of debt!
Let’s review the steps to debt freedom.
Step 1 – Understand WHY you want to become debt-free! You greatly improve your chances of becoming debt-free when you understand the reasons that you are making sacrifices in lifestyle!
Step 2 – List your debts. If you don’t know how large the giant is, it makes it really difficult to understand the overall situation!
Step 3 – Calculate your Debt Freedom Date. When you have put together your Debt Freedom Date calculation, print it out! Put it on the refrigerator! As you pay off each debt, draw a big line through it! You will not believe the conversation this will start with your family and friends as they come over to visit.
Step 4 – Establish Accountability. If married, hold each other accountable. If unmarried, have someone who has won with their own money and has your best interest in mind.
Step 5 – Secure Your Debt Freedom. Before attacking your debt save at least $1,000, or $2,500 if you’re married with children, so you have an emergency fund.
I hope that you have taken the time to write out your plans, hopes, and dreams for your life. Knowing these will help you stay the course. It will motivate you to say no now so you can win later!
What are you going to do with your tax refund?
While tax season may seem like a distance memory to some, others may been filing today. 2020 has brought about a lot of changes, one of which was an extension for tax filing from April 15th to July 15th.
If you’re getting a refund what exactly should you do with this “extra” money this season? Save it? Pay off a debt or two? Invest it? Spend it? The possibilities might seem endless!
However, I would encourage you to plan out your refund BEFORE you ever get it.
STEP 1 Before You Spend It, Plan It
I used to have my tax refund spent sixteen different ways by the time it actually arrived. It was assigned to pay for Christmas, vacation, clothes, credit card bills, student loan payments, car payments, a new appliance, a new electronic device, etc.
In addition to having spent the refund sixteen different ways, I had already made all of the purchases via credit cards or other forms of loans.
When the refund actually arrived, it was woefully inadequate to cover all of my crazy spending.
Talk about feeling miserable! Is anyone reading this feeling my pain, or am I the only one who has done this?
When I decided once and for all to take control of my finances, I realized the root cause of my problem.
What was the root cause and the reason for all of my crazy spending?
I did not have a PLAN!
Before you spend your tax refund, plan out the spending! I highly recommend that you use the Mini-Budget Form (Excel) to plan your spending. Enter the amount of the tax refund at the top, and spend it to exactly zero. Remember: INCOME – OUTGO = EXACTLY ZERO™.
Start planning now – BUT don’t start spending just yet. We are still in the planning stages.
Next, we’ll cover where the money should go!
STEP 2 Build the Wall
Next, you need to build a wall of protection! When maximizing your tax refund, there are three categories that can help you build this wall:
(1) Save it, (2) Reduce Debt, (3) Invest it
When you’re trying to decide where to spend the money you get from a refund I typically refer back to the I Was Broke. Now I’m Not. Ladder. By identifying where you are on the ladder, you can pretty easily decide on the best way to spend your refund this year.
FIRST: Save It
One of the biggest reasons people fall off of the “I’m Going to Achieve Debt-Freedom” wagon is because they do not have any savings. Life is going to happen and it will cost money! If you do not have any savings you will remain broke.
Do you currently have money saved for emergencies or Known, Upcoming Non-Monthly Expenses (Christmas, vacation, property taxes, annual memberships, homeowner’s association fees)?
Before attacking debt or investing, you need to save money! Start with saving at least one months of expenses. How would it feel to have one month’s of expenses JUST SITTING THERE in your bank account?
I remember the day that this happened – and I did not have to mail it out to a creditor!!
If you do not have savings, use your tax refund to fill it up! Don’t have an account? Get great interest rates from these banks:
After you’ve established your emergency fund you should make sure to save for your Known, Upcoming Non-Monthly Expenses! These are expenses that we KNOW are going to happen.
Known, Upcoming Non-Monthly Expenses like Christmas, vacations, property taxes, building fund pledges, quarterly insurance premiums, annual health club membership fees, annual golf club dues, and homeowner’s association fees. If you have not saved for these expenses, they will completely derail your financial plan!
It is AWESOME to have money saved up in advance for vacation and Christmas!
SECOND: Reduce Debt
Don’t skip ahead to this step! Make sure you have savings first!
Too many people race past the previous option and use their $3,000 tax refund to pay off $3,000 of a $5,000 credit card. They have no Emergency Fund, they haven’t saved for Known, Upcoming Non-Monthly Expenses, and now they have just spent all of that money on a credit card.
Even if the $3,000 paid off the credit card, it is still not worth it if one does not any savings! Think about it this way. If the $3,000 credit card had a monthly payment of $100, how long will it take to get that $3,000 back into the bank? THIRTY MONTHS! Not worth it.
BUT, if you have taken care of the Emergency Fund and have saved for your Known, Upcoming Non-Monthly Expenses, it is time to attack the debt! Pull up the Debt Freedom Date Calculator (Excel) and calculate your own Debt Freedom Date! Make some debts leave your life!!
If you have already saved money and reduced or eliminated your debt, your next step is to invest. Investments are the KEY to funding your big time plans, hopes and dreams! Investing is simply using your money and possessions to create more money and possessions. The goal for any investments is to gain more in return.
To learn more about the investments I’ve made this year check out the Monday Money Tip Podcast Episode #87.
STEP 3 Fulfill Some of Your Dreams!
Since the word FUN is in the middle of refund, make sure to have a little fun and fulfill some of your dreams!
Your tax refund could allow you to be generous and bless others, have a fun day with your family, or contribute to funding a dream.
What dreams do you have? What will it take to accomplish them?
Here are some good questions to ask yourself to fire up your dreams again:
- What opportunities do you want to provide to my children?
- What trips do I want to take?
- Who do I want to bless? What do I want to bless them with?
- What type of house do I want to live in?
- Where do I want to live?
- What career(s) do I want to pursue?
- When do I want to retire?
My passion is to teach you how to live a fully funded life so that money doesn’t keep you from living your dreams. In my book, 20/20 Money, I talk more in depth about how to make your dreams a reality.
STEP 4 Should You Even Receive a Tax Refund?
This one will be argued until the sun fizzles out, but here are my thoughts.
If you have proven to yourself that you can abide by your written budget every single month for several months, then you could consider increasing your W-4 exemptions so that you come close to breaking even at tax time.
Because you have demonstrated the ability to stick to your written plan, you will be able to take full advantage of your money instead of giving the government an interest-free loan all year long.
BUT, if you have NOT proven to yourself that you can follow a written budget, I would highly consider leaving your exemptions as is. Focus on getting your money management under control by planning your spending using a BUDGET FORM from the “TOOLS” page.
You should keep it the way it is until you have sufficiently proven to yourself that you are a good manager of money. Think about how horrible it would be to blow all of that extra money in each paycheck and then not even receive a tax refund check! Awful!
STEP 5 What Do I Do if I Owe Money?
Maybe you’re reading this, and thinking I wish that was me. I wish I was receiving a refund, but instead I’m going to owe money.
Many people who have delayed filing have probably done so knowing they are going to owe money. Some of you have already started to save money in preparation for this, but others may be wondering where or how you are going to come up with extra funds.
Check out Episode #83: Money Saving Tips and Episode #106: Buying and Selling Online of the Monday Money Tip Podcast if you need some ideas on how to save or earn some extra money for your tax payment.
Maximizing Your Tax Refund
As I shared before, I used to spend my tax refund sixteen different ways BEFORE I ever received it! What a miserable feeling it is to receive that great tax refund check and turn around and mail it out to creditors. Anyone identify with that feeling?
But, I also know what it is like to receive a great tax refund check and be able to KEEP IT ALL! What a great feeling! It is a reward for sound money management.
Why not make this year be THE YEAR that you take control of your finances?
Use this tax refund to make sure you’re on the right track financially. Stock up your emergency fund, pay off debt, and start funding your dreams. Whatever you decide to do, do it intentionally. Write up a plan, and allocate the money according to that plan.
For more tips about how to maximize your tax refund check out Episode #82 on the Monday Money Tip Podcast.
Recently, I was teaching the Financial Learning Experience at my local church when I had a gentleman raise his hand and asked this question.
“How Do I Stop Being Impulsive?”
My answer? I don’t know to stop the impulsive nature, but I DO know how to control my impulse to spend recklessly.
I am a SPENDER. I am the type of person who would go out and accidentally buy a truck. I am a spender to my very core. I like buying things. You could say impulsive spending comes naturally to me. The best way I’ve found to combat my impulse to spend is being intentional about my finances.
Here are some steps I have taken that helped me reign in my impulsive spending nature, and it has allowed us to win financially!
A Written Spending Plan
The first thing that helped me reign in my impulse to spend is putting together a written spending plan EVERY month BEFORE the month begins. Jenn and I continue to do this EVERY month BEFORE the month begins. Did you catch that? EVERY month.
It reinforces the fact that we cannot flippantly spend our money and expect to succeed. When you have personally helped prepare the spending of your money on paper, you are much more aware about whether or not you can afford the “I WANT THAT!” item.
Having a written plan means that each month you have already told your money where to go on paper before the month even starts. Instead of wondering, “Can I afford this?” or thinking “Maybe it will be okay just this once,” you already know the answer. You know what you have allocated for each category, and if you spend impulsively how it will break the budget.
Jenn and I use the budget forms that are available on the TOOLS page of our website. If you want more information about how to start budgeting check out our post “How Do I Budget?” for tips on how to get started. Trust me, the word budget doesn’t have to send chills up your spine. I can, and it will help you win with you money!
Like I said before, I am an impulsive spender, but even I will not impulsively spend money on the electric bill. I won’t impulsively purchase gasoline. I don’t impulsively send extra money to the cable company. There are some things that I am not going to impulsively spend money on.
However, there are some things that I am VERY impulsive about. Items like groceries, dining out, clothes, spending money, and entertainment. I can go through some money really fast with these items! Since I know that I am impulsive for these spending categories, I use cash envelopes.
At the start of the month we add up the amount we have put in the budget for these categories. We then pull that amount out in CASH. The rule is that we can not pull more money out from the bank AND we can not use the ATM or debit card. I can not overspend cash.
To read more about why I LOVE cash envelopes check out this post.
Chop Up Credit Cards
You may pay yours off every month, but the vast majority of Americans do not. I was part of the vast majority, and I had to admit that I was a completely loser with credit cards. I ran those stupid things up three different times. I was stupid with them. They really catered to my impulsive nature. So I did what had to be done and applied the scissor blades to them and shut the accounts down.
After years of not using credit cards I do have them again now. How do I keep myself in check? Well, I still don’t use them on things I am impulsive about. Can I use them to pay utility bills? Yes! Can I use them to book travel for work trips? Yes! Do I use them for my spending money that I have budgeted for each month? Absolutely NOT!
Many of you are like me – you need to kill the bad spending habits, and the only way to do that is to get rid of the card. If you are able to have them later on you have to make sure you have accountability in place – like a budget that you review with your spouse or not using them for things you are tempted to overspend on.
How do I eliminate the credit card debt I already have from impulsive spending?
Maybe you are thinking, “Joe, that sounds great, but I’ve already wracked up credit card debt.” If you have questions about how to pay off credit card debt check out our post “You Can Be Debt-Free.” You can also listen to our Monday Money Tip podcast episode on “0% Balance Transfer Credit Cards” or check out options of 0% balance transfer credit cards on our Next Steps page to see if they can help you eliminate your credit card debt.
If you are a fellow spender, what have you done to control your impulsive spending habits?
Let there be…TIME
Sometimes the best cure for the “I wants” is time. The moment we see it we want it, however if we wait to purchase sometimes the desire fads.
If today you see the shiny new motorcycle your neighbor just bought you may think “I want one.” Don’t run down the street to your local dealership and purchase it right away. If you wait a few weeks it will bring clarity. “That motorcycle is awesome, however I really would rather save up for a boat that my whole family can enjoy.”
The more time between the “I WANT THAT!” moment and the actual “Purchasing Decision” moment, the clearer the decision will be. Impulsivity can lead to buyers remorse, and a slue of unnecessary things filling your home that you really don’t need (or want for that matter).
One of the best ways to stop impulsive spending is to seek guidance from someone you trust and wants to see you prosper. I’ve said this before and I’ll say it again (and again and again), find wise financial counsel. If you are married include your spouse.
Having someone else invested in seeing you succeed financially creates accountability and will encourage you along the way. It’s a lot easier to stay the course, and stop the impulsive spending when you know you are going to have to answer for the purchases you’ve made.
Stay The Course
We are ALL impulsive. It seems to be different things for each of us, but we all have a case of impulsiveness every now and then.
If you do get off course – make the rash purchase – don’t let it derail you. Tomorrow is a new day, and a new opportunity to make wise spending choices. Look at what lead to your impulse purchase, and think about ways to prevent something like that in the future.
I wonder if any of you out there would share some “near misses” where you almost made a horrible, snap-judgment financial decision but you did not. What helped you make the decision to back out? How does it feel now as you look back on the situation?