We all want our money to go as far as it can and wasting money isn’t being responsible money managers. The better we use our money the more we have to eliminate debt and get our lives back.
Search within the right parameters
[pullquote]You wouldn’t shop for clothes at the DMV.[/pullquote] When stopping for gas you probably weren’t planning on buying a couple cowboy hats. Purposeful spending begins with selecting the appropriate vendors or stores that provide what you are looking for.
Following this step helps us to identify when we are about to make an impulse purchase.
Look and Compare
Walking into a Macy’s with your eyes closed and grabbing the first item you think will work is not making a wise purchasing decision. Pants are different than shirts, shoes are different than belts and a necktie is really inappropriate when worn as underwear. Shopping wisely takes into account sizes, fits, colors, and a multitude of other variables. Careful consideration is made when we look and compare items before hitting the cash register.
This step allows us to be comfortable with our decision and reduces buyer’s remorse.
Price it out
It would be irresponsible of me to purchase a $300 shirt. Our income does not support that kind of lavish purchase. It would also be irresponsible for me to buy something without looking at the price tag at all.
The easiest way for someone to break their budget’s back is going out to eat. When my family goes out to eat I don’t necessarily look at the prices of the drinks and additional side items, but those things can easily increase a restaurant tab by $10 – $15 when tax and tips are included. Do that a few times a month and you are talking about overspending by hundreds of dollars.
Paying attention to this step is the most important one – and it’s the one that will destroy the budget of anyone that doesn’t pay attention to it.
Does it do the job?
One last consideration must be made before buying an item – does it do the job? Why would you buy something that you didn’t use? Even decorative items have a purpose but spending money on the wrong things is irresponsible.
The food at an expensive restaurant becomes more valuable when it is used to spoil your wife, spending money at Chuck-E-Cheese only makes sense when spending time with your kids, and buying a family size vehicle that can fit your entire family instead of buying a sports car are all examples of getting things and doing things that have meaning and purpose.
By the time we have gotten to this point it should become obvious if this is a smart purchasing decision or not.
Four ways to pay
There are four main payment types that we use. Only one will absolutely help you stay within your budget, two can help, and one will destroy it:
Credit Card – This payment option uses other people’s money for 30 days or longer. It’s the most popular electronic payment option and gets people into soul-sucking debt.
Check – Paper checks are rarely used by anyone younger than 40 so this payment option is going the way of the dinosaur. However, it is tied to your bank account and is not a debt instrument so long as you have money in your bank account.
Debit card – My favorite payment option. Pros: I don’t have to carry a bunch of cash around and I can easily enter my debit card purchases into YNAB at the register so I don’t have to enter them when I get home. Cons: You spend more money when using plastic, even debit cards, and you could go into overdraft if you don’t pay attention to your budget.
Cash – Paper money is finite. This makes it the perfect medium of exchange that keeps you within budget. Putting grocery money, entertainment, eating out money, and clothing budget into envelopes will keep you within your pre-determined budget categories.
Making smart purchasing decisions is very important to staying with your budget but how you pay for them is equally important when paying attention, not interest.