We’ve all been there—staring at a long list of credit card transactions and wondering how things got so out of control. If you’re in the habit of buying stuff you can’t afford, it’s time to do something about it. Debt can have a huge impact on your credit scores, not to mention your ability to reach major life goals like buying a car or owning a house. You can break the cycle by understanding the risks of your habit and taking steps to break it.
Stop buying things you can’t afford and start managing your money like a pro. Follow the seven steps below to start a more positive personal financial journey.
1. Understand Needs vs. Wants
If you get tempted by the first shiny object you see, you need to be able to take a step back and ask yourself if the purchase is really worth it. Not sure how to do that? You can start by asking yourself if you need it or just want it.
If it’s something like the latest video game or an indulgent couple of days at a spa, it’s pretty safe to say those are wants. They may feel like things you’re entitled to—you’ve worked hard, so you deserve them. But chances are, you can live without them—and your wallet is probably better off for that choice.
2. Make a Budget
A great way to get your mind in the money-saving game is by drafting a budget. Dealing with finances seems like hard work, but drafting a budget doesn’t have to be boring. In fact, it can be a fun way to determine all the good things you get to spend money on.
Use a personal finance app to get started or go the old-fashioned route with pencil and paper. Start with expenses, which are the things you must pay every month, such as your rent. Write down how much you have coming in and deduct your expenses from that amount.
Now you know how much discretionary income you have for the month. That’s what you can safely spend without going in the red. Aim to spend less than that amount so you have something to save for another day.
3. Put Away Your Credit Cards
Credit cards may seem like a foolproof way to spend money—after all, you don’t have to pay them until your bill’s due date. But throwing a bunch of unnecessary charges onto your credit card is a one-way ticket to debt.
Accrue too much debt, and your credit could take a big hit. That’s true even if you make the minimum monthly payments on time. You can see where your credit currently stands by viewing your free score on Credit.com.
Credit cards can be a great financial tool. But if keeping one in your wallet is simply too tempting, consider leaving it at home or cutting it up to avoid using it to buy things you can’t afford.
4. Stop Making Excuses
More than anything, your habits depend on your mindset. And if you’re telling yourself the wrong things—such as I don’t have time to set a budget or I don’t earn enough money—your spending won’t improve. If you want to make real progress, you’ll need to get honest with yourself about your spending and take steps to address it.
For some, that might mean speaking with a professional. For others, it might be as simple as using a spreadsheet to see where they’ve been going overboard. Whatever it is, make sure you get started now to avoid the pain later.
5. Cut Out Some Expenses
So, how do people afford expensive things? You don’t have to be rich, and every tip on this list isn’t about not spending money. Sometimes, the answer is not buying one thing so you can afford another.
This tip is about setting priorities for yourself. If you really do want those designer shoes or feel your life will be seriously improved by the fancy coffee maker, find out how much these items cost. Then, look closely at your spending. Can you cut out something else to save up to pay for a luxury item without going into debt?
6. Increase Your Income
If you’re looking at your budget and there’s no wiggle room—nothing to cut out—there’s another answer to how to buy something you can’t afford. Find ways to increase your income so you have more disposable cash. Some popular options include:
- Seeking a job that pays more
- Getting a second job
- Joining the gig economy—you can get paid to write, take pictures, deliver groceries, give people rides in your car and a whole range of other things
- Selling stuff you don’t use online or in local consignment shops
7. Open a Savings Account
Consider opening a savings account through one of Credit.com’s partners. This gives you a place to put money you save each month in your budget. What do you do when you want to buy things you can’t afford? Start putting what you can afford into a secure, interest-bearing savings account so you can look forward to making that purchase later.
And if you decide later that you don’t want this thing after all, no problem. You have the money in a savings account to use on something else or to go toward your future goals.