How to Quit Spending more than you Make

People have been living beyond their means for far too long, relying on easily available credit without taking into account whether they would actually be able to pay it back in the future. Bankers were just as much to blame, providing loans to people who it was clear would never be able to pay off their debts. The bubble has now burst, though, as questionable banking practices and a global downturn have led to the so-called ‘credit crunch’. Now banks are reluctant to lend money to anyone, whether they can pay back the money or not. People are having to learn to adapt to a world where credit is not as free-flowing as it once was, and to recognise that they can no longer spend more than they earn without serious repercussions for themselves and the wider economy.

Individuals need to examine their finances and work out how much money they have actually got coming in, and how much money is going out. It is important to establish a budget, so that it is possible to distinguish between the items and services that are really needed, and those which are simply luxuries. When money is tight the first things to go are the non-essential, luxury items, as they are just not a priority. A budget keeps people’s minds focused on making the most of their money, concentrating on necessities rather than on superfluous items.

When people know how much they are spending they will be able to look where savings can be made, not only by avoiding purchasing certain items, but also by shopping around for the best deals. This can apply to their grocery shopping; where they buy their internet, telephone, mobile phone, and television services from; as well as their gas and electricity. In the midst of economic turmoil, when companies are struggling for survival, there are deals to be had for people prepared to search around and negotiate.

Once a budget has been established, and savings made, where possible, it is important for people not to jeopardise their budget by going on spontaneous shopping sprees. When going shopping, individuals should take only the money they need, and not their credit cards, and should try not to get distracted by the multitude of special offers designed to tempt shoppers into wasting their money.

If possible, people should set aside some money as savings, so that if any unexpected occurrences crop up they will have the funds to deal with them, without having to spend more than they are earning. It might be tempting for individuals to spend money before it is even in their hands, or to spend money they have not even got, but the time has come for everybody to get a grip on their finances once more, and appreciate the value of frugality.