So this tip seems like a no brainer tip as well. It’s a simple concept really.. If you don’t have the money for something, don’t go and buy it. As simple as it is, this could be one of the hardest concepts for people to grasp, especially if you don’t have a budget set (see tip #1).
So what’s the worst that can happen if you just happen to splurge a bit one month on a pair of shoes and then maybe decide to get a fancy new iPad from your local Apple store the next month. With each item that you purchase that is above your means, you’re putting yourself at risk to get crunched on other bills. This can be a slippery slope because sometimes you allow yourself to spend one month and then psychologically, you think ok maybe I can do the same next month. What most people find is that they start paying things with credit cards. This opens you up to interest charges. These will continue to pile up and all of the sudden you find yourself in a deep hole.
I can tell you that a really good way to combat this temptation is to have a clear budget in mind. You have to have clear goals on what you want to accomplish financially and march in that direction. If you know that you have x amount left to spend on discretionary spending, then you’re more likely to question do I really need this item and you have a better chance of not getting tempted into purchasing the item.
I think that college grads have to be especially aware of this trap since a lot of us go into a new job and all of the sudden there’s an instant cash flow. We think to ourselves, oh I can go get this, this and this and end up not saving money for a rainy day. If you live by the rule of not spending over what you really have, you’ll do yourself a big favor in the end.
– The Lermz