Are you realizing that you need to control spending more than you need to get out of debt or to increase your personal cash flow? If so, you’ve already come a long way in comparison to the general population.
Many people spend their entire lives broke or struggling and looking for ways to increase their personal cash flow or build multiple streams of income, but without first learning to manage the income that they already have.
However, being broke is more about your habits and your attitude about money than it is about how much money you’re making or how little money you owe.
As long as you’re not spending money responsibility, there’s no point in trying to make more of it. However, when you learn to control over spending, it makes sense to increase your income and to build multiple income streams. Let’s look at a few ways to put a stop to the spending habits which keep people broke.
#1: Start Using Debt Properly
The only time it makes sense to use debt is when you have an investment strategy which is working and which you are 100% certain is worth borrowing money to fund. Other than that, make a decision that you’re just going to stop borrowing money for expenses and emergencies and every other thing in your life.
This is simple advice, but almost no one pays attention to it anymore. People have gotten into such a habit of borrowing money that in order to make a decision to live without it, you have to make a complete change in beliefs.
However, proper use of debt is one of the most liberating steps that you’ll ever take towards achieving financial freedom. If you’re having trouble practicing this one, lock up your credit cards and give the key to someone who you trust to not mess with them and to not give in when you come asking for it. Then, pay the cards off, close the accounts and make a decision to never use credit for your regular expenses again.
#2: Become Conscious of Your Spending
Start writing down everything that you spend in a spending journal and review it on a weekly and monthly basis. Again, very simple but if you do this, you’ll find that you don’t even have to try to start curbing your spending. Instead, the shear awareness of how much you’re spending on certain things will motivate you to start changing the way that you spend money.
Most people overspend because they are in a slight state of denial about it. By writing your spending habits down, you’ll be forced to face your habits and that alone is usually enough to initiate a change in behavior.
#3: Use the Four Bucket System
With the four bucket spending system, you have four categories which you split your spending into: expenses, investing, giving and cash reserves (for pre-planning purchases instead of using credit). With this system, you keep your expenses at 70% or less, and the other three categories at 10% or more each.
Now, you simply take care of the first three categories, and then pay expenses. This literally eliminates the possibility of overspending and forces you to change your priorities when it comes to spending your money.
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