Understanding Your Behavior to Reach Financial Freedom

For some, resisting the need to splurge on shopping can prove challenging. Whether it’s on bargains or the latest designer must-haves, certain people just can’t resist. Then there’s those of us that feel a compulsive urge to save and shun shopping sprees in favor of keeping the bank account in check.

So, if you fall into one of these categories, you may feel like your spending habits are restricting you. Those who spend may struggle to fund significant purchases like holidays and cars. Where savers could be hampering their ability to enjoy some finer things in life and treat themselves now and then.

There is no right or wrong answer. However, different extremes can impact our everyday lives. So how do you tweak the way you spend to ensure you get the most enjoyment out of your money? To help, we’ve compiled a list of hints and tips to help you understand your behavior and reach financial freedom.

financial freedom

If You’re a Spender

We’ve all been there at one point or another when we treat ourselves to a shopping haul. It makes us feel great in the moment and releases those feel-good hormones. However, if this is a weekly occurrence for you, it may be time to reflect.

Firstly, it’s important to understand what it is that’s compelling you to spend. A psychological study on consumerism found that when we experience something unpleasant an area of the brain called the insula cortex is activated. The study linked this to how we spend and found that those who splurge have less insula compared to those who save. Spenders, therefore, feel less guilt and fear when on a shopping spree which can really impact those purse strings.

So, if this is having a real impact on your bank balance, how do you overcome it? Here are a few simple changes you can make.

1. Withdraw Cash When you Shop

Yes, it may seem like an inconvenience, but it will prevent you going overboard on your card. Withdraw the cash and leave your debit card at home. You’ll then have a serious budget to stick to. This will help you to plan your shopping trip more strategically. Instead of shop hopping as you please, you’ll be more focused on buying the things you need.

2. Get to Know Your Triggers

Think what compels you to spend. We all have certain triggers that make us do things and understanding those that make you shop can really help. There are plenty of different factors that affect people differently, here’s a breakdown of the most common:

● Mood: when you’re feeling low, do you find yourself heading out for some retail therapy?
● Environment: Are there specific places that make you want to spend? Markets, craft fairs and shopping centers are all big offenders
● Peer pressure: You may think that you’re over this, and it’s something that happens on the playground, but you’d be surprised how ‘keeping up with the Joneses’ can damage your bank account
● Lifestyle: When you’re used to a particular way of living, it can be hard to maintain if you run into financial problems.

3. Keep an Eye on Your Spending

It’s surprising how things can add up when you’re not paying attention. Uber rides, morning coffees and treats here and there can cause all damage the bank account. Print out your bank statement monthly and have a look at your spending habits. It may come as a shock to see that those ‘harmless coffees’ are draining your account. Think what you cut down on.

Mint is a handy, free app that helps you to keep an eye on your savings. It’s super easy to use and gives you a full breakdown of your finances in one place.

4. Find Extra Ways to Boost Your Income

If you’re concerned about how much you’ve spent over the past year, then why not explore ways to make some back? By having extra streams of income, you’ll feel more financially secure, and it can be really simple too. The online auction site, eBay provides an easy, hassle-free way to sell your belongings (old and new). This is just one example of many, so check out this handy article on 50 ways you can make some extra cash.

If You’re a Saver

You’re definitely in the safer camp when it comes to personal finance. However, never spending can prevent you from certain experiences and necessities. Opting out of insurance policies or warm winter boots to save money isn’t always the best option.

By taking a step back and bringing more balance to your spending, you’ll find it can really pay off. Shopping may make you feel uneasy, but there’s nothing wrong with treating yourself now and then – after all life is for a living.

To help give you an idea of how you can tweak your habits to give you a bit more financial freedom, here are a few tips.

1. Open a Guilt-free Bank Account

As a saver, you’ll like to keep track of things. Therefore, having a set place for your ‘spending’ funds can work well. Think about the amount of money that you can afford to set aside each month (set your own budget). Then when you see something you like or a holiday you want to book, you’ll feel less guilty spending as there’s money in the ‘guilt free’ account.

2. Work on a Reward Basis

Say you get a promotion at work, or you pass a course – treat yourself! You deserve it, right? This works particularly well for savers as it helps to justify purchases they wouldn’t usually make.

3. Talk About Spending

Not in a crass way but talking to others about a purchase you’re going to make helps to seal the deal in your mind. For example, if you’ve wanted to go to Thailand for years and have the money to do it, talk about it. Tell people that you’re thinking of going and they’ll more than likely encourage you. Once you’ve vocalized your intention, it makes it much easier to press ahead with that purchase.

To Sum Up

No one’s perfect and we all have habits we wish we could break. Whether you dread shopping or revel at the thought of a splurge, it’s important to have balance. Take a step back, think about the financial changes you want to make, and develop a plan. As money plays such a large part in our lives, some simple changes for the best will have a positive impact on not only your wallet but your mindset too.

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