Spending Diet: A Guide

by Nicole Ryan, Student Blogger

It’s Friday night and my roommates and I have decided to invite our neighbors over for a movie night. Everyone is just arriving when I get a not so happy phone call from my mom. I step outside to talk to her while she, in her very Italian way, informs me she just received my credit card bill in the mail. Although the card is in my name, my mom and I take turns making payments on it considering I’m on a college budget and the card is only supposed to be used for essentials. However, with the holiday season having been just behind us at the time, it seems as though I had gotten a little carried away with the credit card.

The card which used to have only a balance of $200 on it, now suddenly had a balance of $600, quickly approaching my $800 limit. Sure, I had used the card for grocery shopping and gas, but how could I have charged so much? As I was on the phone with my mom, she began to read through the list of charges to the card; $10 at Starbucks, $30 at Forever 21, $15 at Target, and so on. It finally dawned on me just how out of control my spending had gotten within the past few months. Each time I used my card I would justify it by saying, “Oh I never use this card, it won’t hurt to use it just this once.” Well “just this once” started to happen on a regular basis, and I had no awareness of it until I was hit with that $600 bill. This is when I decided my spending needed a drastic change.

I love the idea of a spending diet because not only does it give you a way to manage your finances, but it also gives you a whole new outlook on what is most important in your life. When you take time to reevaluate your spending, you are ultimately reevaluating your priorities. Spending diets are great to do when things seem to be becoming increasingly out of control. They’ll help you re-focus and get back on a healthy spending track.

Here are 8 easy tips to follow when beginning a spending diet:

1. Make a list of Wants vs. Needs
Find out what your necessary spending needs are. When on your spending diet, try to stick to only your needs list. If you want, you can allocate a small budget for your wants list, as long as this won’t be hurting your progress.

2. Set a timeline
Decide how long you want to participate in the spending diet. Researchers suggest it takes 30 days to break a habit, so if over-spending is yours, try starting with a month! Some people go on spending diets for longer, even up to 2 years!

3. Set a limit & Stick to it
Even when buying the essentials, make sure you have a set limit for how much you want to spend. This limit can be either on a weekly or monthly basis, whichever is most easy for you to track. Remember to stick to whatever limit you set. You aren’t going to do any good if you go over!

4. Should I buy it? / Do I need it?
When thinking of making a purchase, make sure you ask yourself, do I need this?  Do I have anything similar to this? What is this purchase going to add to my life? Make sure the purchase you make is something you actually need and will use. Useless purchases are what get many people into financial trouble.

5. Can I find it cheaper?
Don’t be ashamed to bargain shop! If you’re looking to make a purchase but the price isn’t quite in your budget, investigate around. Another store may have the same thing for much cheaper. Considering most stores have online websites now, it makes it easy to compare prices right from your own home.

6. Make a Decision Card
According to blogger Anna Newell Jones, one of the best things you can do when trying a spending diet is to create and carry with you a decision card. Jones describes how to make the card by saying, “Start in the upper left corner and then walk your way through the questions and answers to help put a pause between you and the purchase. Think it through and you’ll find yourself with less crap, less impulsive purchases and more money left to pay off debt.” Some of the questions on the decision card are, “Do I need it?” “Is it expense worthy?” “Do you have any debt?” and so on. Here’s a link to Jones’ blog and her example of the decision card.

7. Find your motivation
Why do you need to go on the spending diet? Maybe it’s because of debt, or maybe you just want to spend less money. Whatever the reason is, identify it and use that as motivation to stick with your spending plan.
www.saveup.com is a great option if you’re looking for some money saving motivation! SaveUp allows you to link your Student Loans, Mortgages, Credit Card Accounts, Savings and 401k accounts in order to earn rewards points for each dollar that you pay towards increasing your financial well-being. You can also play Instant-Win Games, Lotteries and a Super Jackpot with Your Accumulated Points with the potential of winning cars, vacations, and more!

8. Plan ahead & maintain a savings
One of the best ways to avoid over spending is to plan ahead. Spontaneous shopping trips can lead to you spending much more than you originally anticipated. Try to know what you need to buy before you get to the store. That way you can stay focused and on track, not getting as distracted by things you don’t need.
It’s also important to maintain your savings. Any money not being spent on essentials or paying off existing debt should be set aside in a savings account, that way you always have a backup in case of emergencies. I interviewed my best friend and ask her what she thought about a spending diet. I explained to her what a spending diet was, that it’s a financial plan where you try not to spend money on anything other than essentials. After telling her a little about it, I asked if she thought she would ever try one.

Her response was, “Yeah that sounds really helpful. I know I could use a good spending diet!” I then decided to ask her what technique she found to be most useful to help her not over spend. She explained, “Probably having a savings account I can’t touch. That way when I’m putting the money aside I’m not tempted to try and draw any extra spending money from the account.”

I think Jess makes a good point when she says that it’s important to not be able to take money from your savings for extra spending. That’s what is so great about a spending diet. You are able to evaluate your spending habits and change them for the better.

We can all be smarter spenders, pay off that debt, and get our finances back on track. The important thing is to know what is and isn’t worth spending our money on. Own your relationship with your money and you’ll be much more likely to have financial success!

Here’s a list of some helpful websites to guide you on your spending diet journey!