How to Budget When You Are a Spender

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Kumiko Ehrmantraut

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Kumiko Ehrmantraut

Latest posts by Kumiko Ehrmantraut (see all)

• What is Your Starting Balance & Why Does It Matter for Your Budget? - November 25, 2020

I can honestly say I was a complete out of control, total die-hard spender before I came to my senses. I don't think we are just born with a natural like instinct to go out and spend, but I think it's something that develops over time. It's something that is instilled in us by years of bad habits, constant credit card swipes, and unnecessary desires.

Throughout my financial journey that started back in 2011, I have experienced two important things. When I realized my debt was unmanageable, I did what most people do to try to save money. I looked for every great deal; constantly checking the clearance racks to get my next spending fix. I was saving money wasn't I? I wasn't spending full price on a shirt, and I was getting shoes on sale. It all sounds great right?

Now that I am 5 years into my financial journey, I realized that there are two types of spenders. Spenders who don't care about spending $80 on a t-shirt & frugal spenders. I transitioned from an out of control spender to a frugal spender. By becoming this, I was more aware of the money I was spending & I did make an effort to not pay full price for things. But the problem I ran into being a natural-born spender is that I was spending more as a frugal spender than I did before and here is why.

My thought process when I was searching the clearance racks was “I am saving money by shopping on the clearance rack, so I can buy more right?” Before you know it, I was bringing home bags filled with $5-$10 t-shirts that cost more than if I would have just bought the full priced shirt. I was purchasing items simply because they were on sale for $5, not because I actually needed them.

• Related: How to Create a Budget (When You Really Don't Want To)

If you are a spender, and you are like I was, you will find yourself making excuses for your purchases. Whether you are a frugal spender of an out of control spender, you can break the spending habit and reach your saving needs by budgeting.

IT'S TIME TO CHANGE YOUR WAY OF THINKING

This really became clear to me when I started the “No New Clothes For An Entire Year” challenge. You can read about the beginning of this journey here. By forcing myself to not buy new clothes, I realized how unnecessary all of my earlier clothes purchases were. In fact, there have been times when I feel sick to my stomach when I think about ALL of the money I spent on clothes. With all of clothes I purchased, I could have went on a really cool trip, had way more in my retirement, or saved for a huge remodel on my house. These are all the things I really want, but now can't afford because of my spending habit.

You have to stop thinking as a frugal spender and start thinking like an actual saver. To do this you have to start asking yourself tough questions before making purchases. Some of the questions you must ask yourself are:

• Do I REALLY NEED this?
• If I actually need it, is there a cheaper alternative or can I simply make it myself?
• Can I get what I want for free?
• If it's something I need to replace another item, is there a way to make the item I do have last longer or can it be fixed without a new purchase?

To think like a saver, you really have to think about the future. If you spend money now, how will it affect your goals later. If you want to spend $1000 on a new sofa, that's a $1000 less towards a dream vacation or a comfy retirement. You have to spend the money you do have the way you WANT to make sure you are achieving long-term financial goals.

• Related: How 6 Bank Accounts Changed the Way We Manage Our Money

CREATE A BUDGET THAT'S REALISTIC

Create a budget that is realistic. To do this, you really have to know where your money is going. Make sure to check out my Income VS Expenses post here to help you figure out where your money is actually going. One of the most important parts of a realistic budget is making sure every dollar of income has a plan. Here are some basic steps to help you get started on creating a budget.

1. Figure out your income & your expenses.
2. Subtract your income from your expenses. Do you have money left over? Make sure it has a plan and is being used for saving or retirement (this includes any long-term financial goal such as a family vacation)
3. Once you have all of your income allocated for, make sure you have a plan in place.

CREATE A PLAN THAT IS FAIL PROOF

As a spender, it takes a lot of motivation and will power to stop yourself from unnecessary spending. Here is the plan that I used which made it almost impossible for me to fail.

Once I had my budget created, I used automatic deposits for my savings and used a cash envelope system for my budget. With a cash envelope system, it really allows you to see how much you have left to spend in each category.

I would have my paycheck deposited into my bank account and then I would withdrawal the amount I needed to cover my bills. I left the money that was automatically being deducted for my savings in my checking and I took out the rest.

I would then organize the amount I had to spend in each category into envelopes. When there was no more money in the envelope, that was it, I had nothing left to spend. Seeing that I only had $20 left in my grocery budget made it easier for me to say “Ok, I won't get soda this time because I really don't need it. I am going to get milk and eggs instead”. Talk about a reason to stick to the grocery list! If you want to learn more about a cash envelope system, make sure to check out my step-by-step article HERE.

By having automatic deposits from your checking into your savings, you will accomplish the most powerful rule of Paying Yourself First. By doing this, you can't spend the money you plan on saving, because it's already gone and is being used for another purpose. (Check out CIT Bank's Savings Builder.)

From experience, I will tell you that going from a spender to a saver was not easy, and even now I slip up. But we are human, we make mistakes. Don't beat yourself down if you make a spending hiccup after you implement your plan & budget. Pick yourself up, note the mistake, learn from it, and move on.

What are your favorite things to spend money on?