Have you ever thought about changing your spending habits, but grew too overwhelmed at the thought and simply continued maintaining the status quo? You aren’t the only one. Many times we can’t bear to dwell on our money problems, so we push away any thoughts of following a budget or making accelerated payments because it seems too hard.
The downfall of doing this is that when we feel shameful about our money, we actually use it less wisely. Weird, right? The key is to reset your money mind or, in simpler terms, redirect your spending towards what is most important to you.
A big influencer of our improper spending is consumerism. Every day we see ads, commercials, magazines, even blogs, that tell us what we should be spending our money on, whether it is aligned with our goals or not. This leads to feeling farther and farther away from our financial and life goals. Consequently, the farther you feel away from your goals, the farther you actually are.
Reset Your Money Mindset in 3 Easy Steps
1. Identify your ‘wants’ in life.
Whether you want to buy your dream home, travel the world or settle down with kids, you must first identify your top three wants in life. What are your priorities? What kind of life do you envision yourself living? Once you’ve figured out what is most important to you, the next step is to look at how your financial goals measure up.
2. Look at your daily spending.
Does your day-to-day spending align with reaching your goals? Like say, instead of buying a $4 latte, you put $5 away into your savings account. Or are you spending too much money here and there to make any headway? We suggest breaking your costs down into two categories: fixed costs and discretionary spending. In the fixed costs column, you will list all of the non-negotiable costs you have such as insurance, rent or mortgage, groceries, etc. In the other, you will categorize the other items you buy like gadgets, clothing, and entertainment.
3. Adjust accordingly.
Once you have established your current spending habits, we suggest following this rule of thumb when it comes to your future spending. Allocate 50% of your income to fixed costs, 30% to achieving your goals (like retirement or home ownership) and no more than 20% on discretionary spending. Make sure you stack up!
The main point is that ignoring a money problem, whether it is a tiny one or an enormous one, will never make it go away. It will just fester. Don’t let any more time pass before you switch gears and start spending your money in the right way.