The holiday season is tough for everyone. Sometimes spending a little too much is just unavoidable but January shouldn’t be a month of doom and gloom because you’ve gone over budget.
With that in mind, here are five effective tips for countering the urge to spend over your budget when it’s unnecessary to do so.
Set a budget
This is quite possibly the most important tip on the list. Review your expenses as well as your revenue and decide an amount to cap your spending. Consider making a list whenever you go out shopping and assigning each item an amount. This should help you keep track of your funds at all times, and stop yourself from overspending. Goodbudget has a more detailed list on how you can effectively create a budget that suits your individual needs.
There's a saying in some financial circles that in order to set a budget successfully, you must first "know thyself". FXCM states that this trait is important among traders, as it helps them understand their own personality, helping them to plan ahead and make vital decisions. If you have similar traits, or want to implement changes to the way you handle your finances it can help you in all facets of life and ultimately aid you in planning for things such as your retirement.
Don't buy what you can't afford
A 2016 study by T.Rowe Price revealed that about 25% of parents in the U.S. have tapped into their emergency savings or 401(k) retirement plan in order to pay for things, especially for gifts during the holiday season. Worse, some even take an advanced loan of their monthly pay to buy gifts for their loved ones. If you can't afford something without taking a loan or relying on your credit card, then don't purchase it. You shouldn’t be embarrassed if you cannot afford something, because if it doesn’t make financial sense, you shouldn’t leave yourself short in the long term.
Stick to your list
Whether you’re buying food at the grocery store or buying clothes for your family, it’s important not to deviate from your list so that you don’t spend on something you don’t need. Sure, that extra pair of jeans may look good on you but do you really need them? It's easy to buy things on impulse without a list, so make sure to never leave home without one.
Get an Emergency Fund
An emergency fund is money that you can use during rainy days. It should never be used unless there's an emergency (hence the name) such as the sudden need to replace a car part or pay an excessive bill. Even though car repairs can be quite stressful and costly, if you know you have money for emergency situations they can be more manageable. Experts suggest having at least £1,250 in the bank as your emergency fund.
Change for the better
If you feel you're not making enough money, think of ways things you can do to change your situation. Either learn new skills and then apply for a higher-paying job or re-assess the career path that you have chosen for yourself. Most of the time, learning new skills or adjusting the career path that you’ve picked solves the issue of why you aren't making enough money. Choosing a new career path may be troublesome but the long-term results are worth it.
There are plenty of ways to avoid financial stress. All you need to do is plan carefully and explore your options through research.