Bad spending habits can easily lead to a big financial hole if you don’t look out for them carefully. Eunice Sibiya, Head of Consumer Education at FNB addresses four of the worst spending habits causing the most financial headaches.
Shopping without a plan or a budget
“How often do you decide to pop into a mall or shop during your lunch hour or on the weekend without intending on buying anything, and come away with armfuls of new clothes, shoes or even a nice cake from a bakery?” says Sibiya.
It is these quick trips to stores that are the major undoing for many people.
Even if you go into a store with the best intentions, such as going to pay off your store card, you are often led astray and end up buying something as you leave.
The best thing to do is to avoid going to the shops in the first place.
“Unless there is a very specific thing that you need and it is written down, don’t venture into a store,” says Sibiya. “And if you tend to spend your weekends at malls, try finding another option that is healthier for your wallet and your family, like a picnic in the park or visiting friends. Try pay for your store card through an electronic transfer, which will stop the temptation of unplanned buying.”
This also goes for online purchases.
Online shopping is becoming very common and does have good benefits, such as convenience and sometimes lower prices. However, this convenience can easily lead to overspending, as it is available all the time, and purchasing is so simple.
“The same rule applies to online stores as it does for retail stores,” says Sibiya. “Think before casually purchasing online, and unless you have a specific need, don’t browse through online shopping stores aimlessly.”
Small purchases that make big differences
“A take-away cappuccino and lunch every day might not seem like a big expense as a once off, costing around R50,” says Sibiya. “But, what is most people’s undoing is in its regularity. These small daily purchases quickly accumulate.”
An average working month has 22 working days, so R50 for each of these days will amount to R1 100, without you even realising it.
“If you are more careful about spending on the everyday, you will quickly find that you have more cash at the end of the month, without even really trying,” says Sibiya.
Not knowing what your are spending on your debt
Do you know the current interest rate on each of the cards in your wallet? The answer is most likely not.
“If you don’t know how much you are paying to borrow money, how can you be expected to keep control of it?” says Sibiya.
Sibiya suggests that you spend some time going through all the different debt you have, from store cards, to credit cards, short term loan repayments, car repayments or your bond and find out exactly what you are paying on each loan.
“Once you understand how much your debt is costing you, you can start working towards paying off some of these debts faster. Once one card is paid off, don’t be tempted to spend on it again,” warns Sibiya.
One of the biggest undoing of spenders is lazy spending.
“Spending wisely and saving is not unachievable, but what it does require is time and patience,” says Sibiya. “Most people end up making bad spending choices, just because they haven’t taken the time to consider an alternative.”
Almost everything that you spend on has an alternative that may be more cost effective and just as good. Everything from discounts on school fees if you have more than one child in school, to reviewing insurance policies, to what common household items you purchase each week.
“When last did you review your insurance policies or when did you last look at the banking fees you are accruing to find out how much that is costing you,” says Sibiya.
There are so many smarter spending alternatives however it requires time and discipline to go through the different options.
“Lazy spending is one of the worst habits to get into, and if not curbed, it may lead to debt spiral. Instead, be financially smart, take action and start spending sensibly,” concludes Sibiya.