Do you have a spending black hole? A place where you consistently spend money on a daily, weekly or monthly basis. Almost everyone has one of these. It could be anything from expensive clothing and purses to inexpensive items like candy, books or magazines.
To identify your spending black hole you’ll need to search through your credit card bill. (If you pay for things with cash you’ll have to search through your latest receipts.) Look closely and you are bound to find stores or restaurants that keep popping up over and over again.
Highlight those expenses and think carefully about them. What is it that you are spending your money on? Is it something you truly need? For example, if you find yourself spending money on clothing take stock of your current wardrobe. If necessary write down how many items you already have in your closet.
A friend of mine found herself buying expensive purses on a regular basis. To combat this she not only counted the number in her closet, but also took pictures of them with her iPhone. Whenever she was tempted to buy another she pulled out her phone and scrolled through the endless pages of purses she already owned. This didn’t work every time she was tempted, but 9 out of 10 times she would walk out of the store empty handed.
You can also ask yourself whether there is an alternative to your purchase. If you spend a lot of money on new books, begin looking at the used market, the library or websites that let you trade books or just pay shipping for them. If you spend money on Starbucks look into the cost of making coffee at home. It might cost more upfront to buy a coffee maker or espresso machine, but add up the cost of a cup over days, weeks and months and you’ll quickly find yourself saving money.
If you can’t cut back cold turkey at least set up spending limits for yourself. Review your budget and come up with a healthy number. Write a rule on a piece of paper and place it in your wallet just in front of your cash or credit card. Write down how much you should be allowed to spend each month or how many items you can buy. Looking down at that simple reminder might be enough to discourage your spending.
If you manage to decrease your spending put the money you would’ve spent aside. If you can consistently cut back you’ll be amazed by how that money adds up over time.
This post is part of Women’s Money Week 2012. For more posts about Saving and Investing see the Saving and Investing Roundup.