Prudence in spending ...Taking control of your wild side

I saw and read your article in The Sunday Gleaner of August 12 and would like more in-depth financial advice on prudence in spending and buying stuff. I like saving but sometimes end up spending my funds unnecessarily! Then end up borrowing money which I have to repay, just because I saw something that caught my eyes. The rest is history.

Please help!

- Marie

You first need to decide if you really like to save and then to resolve to carry through that desire. It is good that you recognise that it is not helpful to save only to spend wildly after that to the point where you need to turn to the savings of others to bail you out. I am confident that you can break the cycle.

First, work on the savings. Determine what portion of your income you want to save. If possible, ask your employers to do a direct deposit to your account. Set up an arrangement with the financial institution you save with to transfer the funds to an account to which you do not have ready access.

You may also explore the possibility of having your funds sent to an investment account. That way, you won't be able to yield to the temptation to use your money so easily.

If you set savings targets and with a particular goal in mind, you should be able to bring more discipline to your savings programme.

Next, control your spending. Begin by questioning every spending decision. Ask yourself if you really have to make that purchase and, if so, if it can wait for another time. You will find generally that delaying a spending decision effectively cancels it or causes you to spend on what really matters.

Calculate the value of overspending or waste. Consider how much your money could become if you invested it.

Consider what you told me: when you overspend, you have to borrow money which you must repay. Borrowing causes you to use tomorrow's income today so you may effectively become worse off tomorrow.

Borrowing is not necessarily bad but it is best not to use it to fund only what will give you passing satisfaction. It is best used to fund education or assets that can give you value over an extended period of time.

Set spending priorities. When you buy what is most important first, it becomes easier to defer or cancel spending decisions relating to what you deem to be of less importance. Decide what you want to buy before going to any place of business. In fact, make a list and stick to it.

Regular consultations

Be accountable to someone close to you about your spending. Have regular consultations and be open and honest about spending activities. Remind yourself of why you must control your spending and re-assure yourself of the joy you will experience when you realise your goal.

Avoid buying on impulse and shop around before committing yourself to a purchase. Use cash or a debit card as much as possible. If at all possible, avoid using a credit card. It makes it so easy to overspend, and it is so costly.

Shopping around is beneficial in the sense that it opens the opportunity to get better deals but the effort may cause you not to bother to make a purchase.

If you find that you tend to overspend when in the company of certain persons, you should consider avoiding their company particularly when you are likely to be in areas where shopping could easily present itself.

It takes time to change so do not get frustrated and give up if your early efforts do not bear fruit. Strengthen your resolve to do better and keep your eyes fixed on your most important goal. You will need money to realise it.

While you head in that direction, give yourself a treat each time you meet your savings and spending targets.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers free counsel and advice on personal financial planning. Send feedback to finviser.jm@gmail.com