So, you have completed step 4, now what? You’re currently doing everything that you need to in order to free-up funds to create savings, invest the savings in an appropriate long-term savings account, choose and purchase the right investments that suit your risk tolerance and savings plan, but how do you maintain this lifestyle? It’s very easy to fall back into the lavish spending way that you once thought was the norm. Well, practice makes perfect – or at least to as perfect as one can be.
There will always be times that you will “slip” and spend based on emotions and not your current financial plan. The key is to limit the number of slips and the total amount spent. You may go out and drop an extra $20 on an appetizer or dessert. In the long run, a few of these slips should not hurt your financial plan; however, it’s the slips where a large amount of money is spent that will hurt your long term financial goals. Purchasing a new car when your older car is still functional, buying a new motorcycle when you really do not plan on riding it frequently, moving to a new apartment or buying a home are all great examples where huge slips can occur.
Now, I’m not saying that purchasing a new car, motorcycle, or house is a financial mistake. These purchases can be financially positive or financially negative. You must do the math, take the time, and put in the research in order to make logical and sound decisions for these big purchases.
When it comes to tracking the little purchases and granular monthly budgets, I use the Intuit Mint application. The application shows me how much left I have in each budget category or how much I have overspent for the month – it keeps me honest. For me, I keep a real close eye on the “Fast Food” and “Restaurants” budgets. I know that I have overspent in these categories in the past and realize that if I keep a closer eye on them, I will be able to limit my spending.
Budget tracking applications let you know where you are – which is great – but, you also must be aware and financially conscious while making each financial decision. Do I get animal style fries at NNOut, or do I stick with the cheaper regular fries? Can I do even better than that and get the double-double and a water instead of the whole meal? This will save a couple bucks.
Overall, some financial splurges here and there are okay if the splurges are for small amounts and infrequent. Financial splurges can hurt your savings plan when the amounts are large. Any purchase over $200 should be carefully though-out and researched properly. Don’t be afraid to sleep on your choices as well. I’ve been known to change my mind and develop buyer’s remorse after purchasing things. Since I know this about myself, I give myself plenty of time before purchasing. Do I really need the item? Will it make my life that much easier? Am I just itching to spend money? These are all questions that I ask myself.