People earn money differently. For example, some of them own businesses while others seek employment to earn salaries and wages. Earning money from an inherited property is possible as well, as is receiving periodic gifts from a spouse or friend. Interestingly, the way people spend their money matters because it affects everyone around them. It affects businesses as well. Therefore, studying these habits is critical to understanding their impact on society.
The spending choices we make daily become habits when repeated enough times. Eventually, these spending behaviors become reinforced such that they are automatic. Identifying and breaking these sneaky spending habits draining your wallet requires you to reflect and analyze where these habits come from.
What influences your spending habits?
The origin of our spending habits varies, but we are generally products of our environment and are primarily influenced by what surrounds us. These could be our parents, media, or the culture of the place we grew up in. For instance, if your parents were frivolous or frugal, you have most likely picked after them.
Your personality also plays a crucial role in your spending habits. We are wired differently, and there is a divergence in how much external experiences influence us. You could have grown up in the same household with your siblings but ended up having very different spending habits.
Things to Know About Spending Behavior
Here are 5 things you should know about spending behaviors.
1. Categorization is Possible
There are three broad categories of spending behavior namely minimalists, consumers, and investors. Minimalists spend as little money as possible. Consumers spend it as fast as they can while investors most of their money on investments.
Knowing these categories is important so that you can understand where you are and where you need to be. You also need to know them so that you can understand what kind of spending behaviors the people around you have.
2. Role of Circumstances
You also need to know that spending behaviors result from influences in a person’s environment, social circles, or upbringing. For example, people in disaster-prone areas spend tons of cash on building safety shelters and purchasing emergency equipment.
People raised in structured and wealthy families spend their money judiciously. Individuals who succumb to negative peer influences are likely to spend their cash unwisely. Moreover, celebrities influence what people buy through their music, movies, and product endorsements.
3. Change is Possible
People feel liberated when they know that they can change their spending behaviors. This liberating feel occurs because rigidity in spending is unwise. For example, invest all your money while having little or no fun doing it is possible, as is failing to plan for raining day. The first step in changing them is accepting that a balance is necessary.
For example, you can go on holiday once a year and invest for the rest of it. At the same time, you can spend as little cash on that holiday and investment as possible. In other words, pay a reasonable price for them.
4. Foreseeing Your Future
Spending behaviors determine your future. For example, do you remember what happened to a musician known as MC Hammer? He filed for bankruptcy in 1996 even though he was earning more than $33 million annually by 1991. MC Hammer was a consumer as opposed to being a minimalist or investor. He was rigid in his spending behavior instead of balancing the three categories. Therefore, his extravagant lifestyle landed him in debt and he decided to file for bankruptcy.
5. Reflection of your Priorities
You need to know that spending behaviors reflect a person’s priorities in life. For example, the most important thing in your friend’s life is partying if he spends all his money on entertainment. Unfortunately, that is the case with a huge number of millennials.
Millennials are people born between 1980 and 2000. Only 18.3% of millennials have a prepaid card. This figure tells you something about the behavior of millennials. More specifically, they are embracing prepaid cards gradually. That means they prefer paying for something before they buy it.
Top 5 Sneaky Habits Draining Your Wallet
Latte Factor: This refers to those small, daily expenses like daily coffee that seem insignificant in the short term.
Spending without keeping track of your money: A typical example is signing up for free trials or subscriptions and forgetting to cancel them, resulting in recurring charges.
Buying without a plan is also called impulse buying. This is the primary cause of buyer’s remorse when you finally realize you bought stuff you don’t need.
Convenience buying. Dining Out is notorious: Eating out is exciting and makes life easy, but restaurant meals are a significant expense compared to homemade food.
Emotional buying. We all go through stressful moments, and it takes determination to control that urge to engage in retail therapy to make you feel better.
Now that we have identified those sneaky spending habits draining your wallet, start by repeatedly making the right spending decisions until they become your newly acquired money habits.
Salman is a prolific environmental writer, and has authored more than 500 articles in reputed journals, magazines and websites. He is proactively engaged in creating mass awareness on renewable energy, waste management, sustainability and conservation all over the world.
Salman can be reached on salman@cleantechloops.com
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