What are your spending habits?

Just like fitness and food, there are good habits and bad habits when it comes to spending. To avoid personal credit card debt, it may help to evaluate where you stand.

Some spending habits could help save you money – like looking for bargains or avoiding impulse buys. Other habits, on the other hand, could see your budget plans go out the window – which could make it harder to meet your financial obligations or goals like paying off your credit card in full each month.

Question is, what are your spending habits?

That tell-all budget

The first step in busting any bad habit is identifying your current behaviours. When it comes to money, a way you could do this is by laying down a thorough budget – which means being completely honest about your spending. You could try a daily diary, a retrospective budget or both. Tips for these are outlined here.

Your daily diary might reveal a spending leak – that is, small regular purchases that add up over time. That $2.50 can of soft drink you buy every afternoon, for example. Over a month, if you went without that soft drink, you’d save $50.

Tracking your spending habits and visualising all the money coming in and going out may be a helpful step toward the path of changing spending behaviour.

The bigger picture

Once you’ve got an idea of your weekly or monthly spend, you can get a little more methodical about working out where your money goes.

One strategy that some people use to set a budget is splitting money between budget buckets. The idea behind budget buckets is pretty simple. There’s one big bucket for money coming in. Then, other buckets separate out spending and saving, for example ‘essentials’, ‘fun stuff’, ‘savings goals’.

Another budgeting strategy people use is to highlight different categories in a budget using different colours. Then they tally up and track just how much they’re spending in different areas of their life. You should consider what budgeting technique works best for you.^disclaimer

Whichever approach you take, the idea is to get to a point where you can see the bigger picture about where your money is and should be going. If your analysis shows that there’s not much money left over for the ‘fun stuff’ – yet your budget tracking shows that you’ve still been using your credit card to spend in this area, and you’re not paying off your full closing balance each month – then you could end up paying interest.^disclaimer

Breaking the bad spending habits

In looking at your budget, are you happy with where your money goes each month? Are there any spending habits that you could potentially kick – based on your individual situation, of course?

By being a little methodical, you might be able to spot areas in your life where you could save some money. By reducing your spend on things you don’t necessarily need, you could free up money for other things, such as paying off more on your credit card, which in turn could help you save on interest over time.