How to Control Your Money Consumption

There is an old joke that makes us chuckle: Some people go over their budgets very carefully each month—others just go over them! Actually, it is not an amusing situation. However, if you can make things seem easier and more fun, sometimes that helps.

Sam likes the analogy that a spending diet is like a food diet. It is easy to spend too much and it is easy to eat too much. He believes you can get your spending under control in ways similar to how you get your eating under control. Belt tightening on the budget and the waistline.

One trick is to think of spending money like eating food. Steal a tip from people who lose weight. Dieters are advised to keep a "daily food diary" to monitor what they eat. Do the same thing with your money consumption. Keep a "daily money diary." This will show you how much money you are spending each day, when and where.

Put a small piece of paper in your wallet or carry a notepad in your purse. Every time you buy something, jot down the details of the purchase. You could also enter it in your PDA. Yes, it is inconvenient to make a note of every purchase. However, that is partly why this trick is helpful: it makes you stop and think each time you buy something. You may even be less eager to spend money because you know that you will have to log the purchase into your "daily money diary."

To break a habit, you have to first notice when you are doing it. If you spend money unconsciously, without thinking about it, it has become a habit. A "daily money diary" helps you notice when you are spending so you can learn to control your behavior.

The "daily money diary" also helps you see exactly how much you spend on those little "budget-busters" every week. Do this for a month. Then use the list to help you establish a monthly budget that realistically meets your needs.

Keep a small wallet
Here's another trick related to dieting. You may have noticed that if you have a larger plate, you tend to take more food. In addition, if you put a large portion on your plate, you tend to eat it all!

The same concept of the size of your dinner plate applies to the size of your wallet. Keep a small wallet. Do not carry more cash with you than you are going to need.

As an experiment for one week, reduce by 20% the amount of cash you usually keep in your wallet for weekly spending money. At the end of the week, you will probably have managed just fine. Now you can save that money every week. It will start to add up!

Get on a cash-and-carry basis

Here's how to do it: First, list all the things you can use cash to purchase, such as groceries, haircuts, lunches, gas for your car, clothes, entertainment, etc.

Second, put the amount of cash you have allocated for each month in each category in its own separate envelope. Be sure to include a small weekly allowance for "walking-around" fun money or spending money. You need some spare money for the occasional treats such as beverages and grooming items. However, once that weekly allowance is spent, you must wait until next week to treat yourself again.

Third, resolve to quit using debit cards, checks, and credit cards. You and your spouse or significant other must promise each other that you will not use your credit card anymore. The only conditions in which you would use the credit card are (1) if it is a planned purchase that you both agree on together, or (2) if you were 100% committed to paying off the entire balance that month.

Extra plastic on hand can make you feel like you have extra money on hand. This is not true. Credit is very, very expensive money. Use it only in an emergency. If you cannot pay the card off at the end of the month, you cannot afford the purchase. Try to remind yourself, "It's not money; its plastic—and its toxic debt!"

It is easy to become "hooked" on credit cards. Credit card addiction can sneak up on you. Before you know it, you may start "tossing down your plastic" several times a day. It is not until you get your monthly credit card statement that you finally realize what you are doing to yourself.

When you get "unhooked" from credit card addiction and use cash to pay for things, your friends will be curious. They will wonder how can you be so prepared and disciplined to be on a cash-and-carry basis. Simply explain to them that you are living within your budget and they can do it, too.

Heidi Clingen is a long-time resident of Stevenson Ranch. She and Samuel K. Freshman are authors of The Smartest Way™ to Save, Why You Can’t Hang on to Money and What to Do About It. They offer only their opinion, which does not constitute professional, financial, or legal advice. To receive a copy of The Principles of Financial Independence or submit questions, email them at Heidi@TheSmartestWay.com.