Flexible Friend or Reason to Overspend?

Don't let your cards take you for a ride that you can't afford!

You know how it is, you go to buy deodorant and end up buying half of Boots; you pop out for milk and come back with a buffet breakfast.  And experts now say that is way more likely to happen if you are armed with a card than if you just rely on good old cash.

It is now widely accepted by many prominent financial advisers that using credit cards will increase your purchases; Dave Ramsey suggests that this figure can increase by as much as 12-18%.

If cash is your method of payment of choice, you have to part with your money immediately - in one big whammy - which can be quite painful - and discourages you from parting with your pounds.
Interestingly, an article published in the Journal of Experimental Psychology says that people are willing to spend (or pay) more when they use a credit card than when using cash'. They attributed the difference in spending behaviour to the way cash can reinforce the pain of paying..

Budgeting

Budgeting can be a complicated task, made even more difficult if you cannot physically count the money in your hands - if you can see the money, you have a better understanding of how much you can afford to spend.

Once you've decided on cash as a budgeting tool, it is best to only take out the amount that you will need to budget for the week. There are methods that can make life even easier, for example, allotting various amounts to different areas including food and leisure.

You may even want to put the receipts in your envelopes to help you to understand where your largest expenditure lies. Then you can think about cutting down in the future. As you get into the habit of sticking to your budget, you will find the act of saving much easier to accomplish.

Top ten warning signs that you could be at risk of over-spending

1. Paying with plastic rather than cash
   As mentioned above, counting the cash in your wallet or pocket is an easier way to budgeting bliss that bending your flexible 'friend'.
2. Listening to music
   Loud music can make you eat faster, order more and therefore eat more in a restaurant.
3. Buying in bulk
   The more you consume, the more you'll spend.
4. Dieting
   Some research has shown that dieting can reduce your will power in other areas of life and you feel you definitely 'deserve' that new outfit.
5. Calculating exact costs
   Don't guestimate the total your shopping trolley will come to; the only sure fire way to do it is with a calculator.
6. Buying clearance merchandise
   Never a good idea for those trying to budget. It is unlikely to ever be something you truly want or need.
7. Shopping without a list
   A one way ticket to temptation!
8. Falling for clever pricing tactics
   In a restaurant where there is wine on sale at £200 a bottle, the £50 bottle suddenly doesn't look so expensive…
9. Emotional Spending
   Had a bad day? Just been dumped? The best way to get over them is not to spend every spare penny you have in the shops or your favourite restaurant - you'll just end up feeling even worse than you did before when you check your empty purse afterwards.
10. Taking too much advice from shop assistants
    We all love a compliment and a bit of pandering to here and there, but don't let those commission-hungry sales assistants talk you out of too much money…

Monday, 29th November 2010

Back to top ↑