Episode 2: I’m over spending… Help!
“Your Life, Your Money is a personal finance series for African youth produced by Guardian TV. The weekly series will educate audiences on methods and practices essential for living a richer financial life. Your Life, Your Money is sponsored by Zenith Bank’s Aspire. The Aspire account is a unique savings account for the Nigerian undergraduate with a distinctive sense of identity.”
Whether you earn N50, 000 a month or N5, 000,000 a month, I think we all have the tendency to overspend if there’s no specific plan for the money we earn. We’ve all been there: salary hits your account at the end of the month and seeing that ‘bulk money’ gives you that ‘I have money now’ feeling and you are lulled into a false sense of security which often leads to overspending.
The impulse to spend on the things we WANT first (those new shoes, that new phone) as opposed to the things we NEED takes over. Then the second wave is the realization that you need to pay bills. (Salaries, food, transportation). After the scramble, before the month even ends you have no money left, not only have you not saved or invested any of your earnings you have to borrow money to meet your obligations!
Here are some tips to help you curb your spending.
Track your spending
Most people don’t know where the money they earn goes. You have to learn to track your expenditure and take control of the income you earn now instead of waiting for your income to increase in the future before you start learning to manage money because the way you spend N10 is the way you’ll spend N10million. We have to spend with intention by allocating our resources efficiently to reflect the lifestyle we want and are able to sustainably afford.
- Write down everything you spent your income on in the last month. This will give you a good idea of where you are spending money and help you identify areas to cut or increase.
- Review your bank statement from last month. Separate the items on there into wants and needs, then limit your wants and prioritise your needs. Spend on the things you love and cut expenses ruthlessly on the things that don’t matter to you.
- Identify things to cut out, so you can create room in your spending to save at least 20% of your income.
Identify your spending triggers
80% winning of your money is behaviour so it’s all well and good to be told to cut your spending but that rarely ever works unless you are familiar with the root causes and behaviour that cause you to overspend in the first place.
We all have spending triggers, the stories we tell ourselves to justify our spending. For a lot of people the rationale is usually I work hard so I deserve it …but you don’t deserve anything you can’t afford. For others it could be everybody has it, so I want it. Maybe it’s the new iPhone or those shoes every ‘It’ girl is wearing on Instagram but if it’s not in the budget you have to remind yourself not to go broke trying to look rich.
Write down your spending triggers. Think about every time you’ve overspent or gone over your budget this year and make a list of emotions that triggered it. It’s important to develop a habit of thinking before you buy. Ask yourself honest questions why am I buying this? Do I really need it? Can I live without it?
Set spending limits for the things you like to splurge on. Figure out the things that matter to you most spend there and cut expenses ruthlessly on the ones that don’t and stay away from people and things that cause you to overspend and cause you to partake in activities you cannot afford and focus on what will help you succeed.
Automate your savings
Try to imagine that you earn 15-20% less than you currently earn, because if you did you would find a way to manage. Pay your future self first by setting aside that 15-20% first before you begin spending. Instead of saving what is left. Automate your savings by setting up a direct debit so the money goes out before you have a chance to spend it.