Managing your finances properly is one of the most important skills you can learn. While it’s true that “money isn’t everything,” it impacts nearly every aspect of our lives. Improper money management can lead to debt, stress, relationship problems, as well as depression. Having a poor credit rating can likewise impact your life negatively.
Unfortunately, it can be easy to let things get out of control. Fortunately, it isn’t hard to see the early warning signs and make corrections to keep you on the right track. Here are some helpful tips to see if your spending is out of control.
Good luck.
Unfortunately, it can be easy to let things get out of control. Fortunately, it isn’t hard to see the early warning signs and make corrections to keep you on the right track. Here are some helpful tips to see if your spending is out of control.
- Audit your finances: The word “audit” might sound scary. Maybe you’ve only heard that term when it references the IRS investigating your taxes. Relax, an “audit” is simply an in depth examination, in this case you are looking at your spending habits.
One of the best ways to tell if your spending is out of control is to simply look at your spending and your income. Are you spending more than you’re taking in? Are you living off of credit cards? You are looking to see if you are spending more money than you are making. If you are then yes, your spending is likely out of control. - Examine your spending habits and know your limitations: What do you spend your money on? Do you eat out a lot? Buy a lot of clothes? Are you the type of person who buys the newest iPhone as soon as it’s released? What’s more important, can you afford to be the type of person who eats out a lot, buys new clothes, and buys the newest iPhone as soon as it’s released?
A large part of responsible money management is responsible spending habits. That means knowing what you can and cannot afford to spend your money on each month. - Learn how credit cards work: Credit card companies make their money off of you not being able to pay your bills on time. It’s that simple. Credit cards charge interest on purchases you make if you are unable to pay the amount in full. A credit card is basically a handheld loan and loan has terms like any other loan.With credit cards, many people fall into the false sense of being able to spend more than they can and “just pay it off as I go.” While this is technically true, you will be charged interest on your balance and if you’re not able to make regular payments to get that balance (and the interest) down you are spending outside of your means.
When looking at your finances to determine if your spending is out of control, look at your credit card balances. See what you are being charged in interest and what you are paying. Is it enough? Is the balance increasing or decreasing every month? It’s okay to accrue a little bit of credit card debt in an emergency or for a major purchase but if you are only making minimum monthly payments and/or adding to your balance each month you will run up against your spending limit and find yourself in debt.
Good luck.
