Controlling your spending

The urge to spend in Singapore seems almost never-ending. Joining friends for a meal, buying a new smartphone, sales galore, a quick trip overseas and more are temptations for spending. The Great Singapore Sale (GSS) only makes the urge to spend even stronger. While the savings can be enticing, however, the only way to save hundreds of dollars is often to spend thousands.

CREATE A BUDGET

Despite all those temptations, there are plenty of ways to keep your spending within your means.

The most important technique for controlling your spending is to create a budget and stick to it. By knowing how much money you have and how much you can afford to spend, you’ll be able to manage your money far better.

While creating and following a budget is easier said than done, apps and websites have made budgeting far easier.

The first step is to add up your income. Next, use your credit card statements, bank statements and receipts to look at your expenses for the last several months. Then, put your monthly outflows into categories such as food, entertainment, transport, clothing and savings. Finally, estimate how much you will need for each one and allocate a monthly amount. Even if you don’t catch every single expense, you’ll have a budget with a good estimate of how much you earn every month and how much you spend.

Then, you can use an app or a website to manage that budget.

Basic budgeting apps allow you to set a budget, track income and expenses, and manage your money. Goodbudget, for example, uses envelopes for categorising your expenses, deciding how much to spend, putting income or receipts into each envelope, and tracking expenses.

Some websites go further by analysing your finances and helping with planning as well as sending alerts when you get close to your limits. Toshl analyses earnings as well as spending to assist with planning, for instance, and it has a reminder service to help you pay bills on time. Wally also allows you to scan receipts and get alerts when payments are due or when you reach a target for savings.

Another easy way to manage your budget is to use an app from your bank to track spending automatically. OCBC Money In$ights, for example, automatically tracks how much you have spent. You can set up monthly budget and savings targets, then receive alerts when you are close to your spending limit. To see whether your budget is realistic, you can also use the app to compare your spending with other people like yourself. Other apps have similar features.

SHOP SMART

Along with using these tools to manage your money, it’s important to shop smart so that you don’t overspend.

One critical step is to follow your budget and shop for what you need rather than shopping to feel good. “Compulsive shoppers tend to be people who bury their head in the sand and ignore the credit card bill,” San Francisco State University Associate Professor Ryan Howell found in his research. “These individuals keep on buying because they are looking for that ‘buy high,’ hoping their purchases will lift their mood and transform them.” His research suggests that you can control your spending by paying more attention to it – track your debit card account, for example - and making sure you buy what you need rather than shopping for emotional highs.

To overcome the temptation to spend too much, financial coach Adam Hagerman suggests leaving a store when you want to buy something expensive and coming back later. Taking that extra time forces you to think about the purchase and only come back after you’ve let it sink in. He also suggests making a list before you go shopping, and thinking about your weaknesses so you can avoid them.

American financial planning company LearnVest’s writer Maria Lin said your only considerations about a purchase should be whether you really need the item and whether the price fits within your budget. “Even big discounts can mean big spending,” she observed.

Some experts even suggest only taking cash along when you go shopping, especially for something like the GSS. When you use a card, observed financial planner Niv Persaud “you just swipe, and you don’t have to think about it”. In one experiment, he said, people were willing to pay almost 80 per cent more for a baseball ticket when using credit instead of cash. Limiting yourself to a certain amount by only taking cash along can reduce over-spending.

Whichever method you choose, what’s really important is to change your thinking and realise that when you decide not to buy something, you’re choosing a better purpose for your money and not denying yourself anything at all.

CONTROL YOUR SPENDING

While controlling your spending may be more difficult than it sounds, taking action can make a real difference. The keys are to create a budget, use an app to stay within your limits, and carefully consider whether you actually need that expensive item that may actually not bring you as much joy as you expect when you’re looking at it in the store.