1- Avoid using credit cards. Credit cards make it too easy to spend what you don’t have.
2- If you must use a credit card, only buy items for which you know you already have the money for.
3- Make a list of your fix expenses for a month (rent, phone, electricity, heating, etc.). Then, compare that to your income for the month (salary, tips, investment income). If you make less money than your fixed (regular) expenses, then you must cut back on fixed expenses (e.g. get a smaller apartment or a roommate, a cheaper phone plan, etc.). Also, you could get a second job earn more income. If you make more money than your fixed expenses, after including food and a minimum for clothes and transportation, then you have what is called discretionary income, that is the remainder of your income after deducting all of the above.
3- Limit yourself to a certain amount of cash a week, depending on your discretionary income. For example, if you make $ 500 a week, and you deduct your fixed expenses (1/4 of rent, 1/4 of utilities, 1/4 monthly transit pass, etc.) and determine that you have $ 100 left, then put that amount in an envelope in your bedroom. Take out half at the beginning of the week and put it in your wallet. This way, you will force yourself to live within the cash in your wallet, but still have some left over if you spend it too fast. This discipline forces you to make choices when your out (not ordering wine at a restaurant, not buying those expensive shoes, etc.)
4- If you occasionally need to make a large purchase, deduct it from your weekly envelope and put it in a second envelope. Don’t make the purchase until you have most of the money saved up. In this example, say you wanted a $ 199 iPod, you would take out say $ 20 a week (plus found money like birthday cash, extra tips, etc.) and put it in the second envelope until you had enough money to buy it (at most 10 weeks).
5- You also need to build up savings for a rainy day (new bed, vacation, retirement, etc.). This must come out of your discretionary income. So, if you have $ 100 extra a week, take $ 20 or so and put it into a savings account. The Rule of Thumb is to pay yourself first (i.e. save) between 5% and 10% of your Gross Income (or salary before taxes).
6- To discipline your expenses. Avoid shopping unless you have the money. When you don’t go to stores, you can’t get tempted. If you must go ‘see what’s out there’, leave your credit and ATM cards at home. Should you find something that you really like or think you need, you could always return another day. At least you’ll have 24 hours to think about it.
7- Try to figure out why you ‘impulse buy’. Is it because you spend to much time shopping? Is it because you’re bored? Are you unhappy with some aspect of your life (job, relationship, etc.)? Then you might want to substitute shopping with other activities, such as sports, outings with friends, a new hobby, a course at school, or in activities to meet new people. Consult the newspaper listings for community events and inexpensive or free activities (open museum days, public pool, bowling, biking, tours of your home town, etc.). If you find that you are depressed, consult a therapist to get to the source of your unhappiness, if you think this applies to you
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