Friday, April 7, 2017

"FOMO" And Other Pitfalls That Cause You To Overspend


If you’re a young person, the idea of saving money could seem totally alien. For years, all you’ve done is rack up more and more debt. You’ve got college debt, a mortgage and a bunch of credit card loans.


There’s a strong case that the vast majority of debt you own is the fault of society. After all, it’s not your fault that colleges have jacked up their fees to ridiculous proportions, and it’s not your fault that house prices have skyrocketed. But is there anything you can do?


For young people, working is rarely fun. When you got your first paycheck, your eyes widened at the amount of money being paid into your bank account. But once bills, rent and all the other necessities of living are accounted for, you realized there’s not much left over. What was once an exciting paycheck is now nothing more than a few pitiful pennies you may or may not be able to stuff away at the end of the month. Suffice to say, it’s not the greatest feeling in the world.


It might seem that starting to save money is impossible. But no matter what your situation, there is usually a way. Many of the financial problems that you face aren’t in your direct control. But there are plenty of pitfalls that could be causing you to overspend. Let’s take a look at these one at a time and see whether or not you are in the habit of saving.

You Feel Like You Have To Say “Yes” To Everything

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Going through life being a “yes” person is a bad idea, in general. But it can be particularly harmful to your finances. FOMO - the Fear Of Missing Out - is a real problem. It’s when you’re afraid to say no when invited out by your friends because you don’t want to miss out on experiences. If you’ve got an active social life, you know how expensive it can be. Going out for a meal or drinks isn’t cheap and can end up sucking up the better part of your disposable income. Just remember, it’s okay to say “no” from time to time, especially if you’re trying to save for a house deposit.


You Act On Impulse


FOMO isn’t the only problem facing many people. Another is their idiosyncratic money pitfalls. Some people spend money purely on the basis of their emotions. Other spend hours browsing the internet looking for the latest and greatest tech gadgets, believing that they can only get by if they have the very best. Still, others think that they only way to make themselves look beautiful is to buy the most expensive makeup when, in reality, it makes very little difference which brand they choose.

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It turns out that having an Achilles heel is very common. The key is figuring out what it is, when it strikes and how to address it. For instance, a lot of people are emotional spenders. Just as emotional eater eat when they get upset about something after a rough day at work, emotional spenders spend when things haven’t gone the way they would have liked. They vent that frustration by going to a clothes shop and buying a new dress or treating themselves to an expensive bar of chocolate from Hotel Chocolat. Just spending money, though, won’t make your life easier. In fact, as DebtConsolidationUSA.com/debt-relief points out, it’ll probably just make your debts worse, causing you even more stress. It’s a good idea, therefore, to look for alternative ways to deal with stress, like doing exercise.


You Save Money That’s Easy To Access


Another common problem is telling yourself that you’re saving money when really you’re just putting it into another bank account and have no intention of leaving it there. Putting your money in a savings account works fine, so long as you’re not hit with a major expense. But the moment that you are, the temptation is to dip into your savings, rather than cutting your current consumption.


Usually, it’s not just a one off. Once you’ve dipped into your savings once, it’s easy to make excuses for doing it again. That why, if you are going to save, it’s best to put it in an account or instrument which is difficult to access. For instance, you could put your money into a mutual fund. The good thing about a mutual fund is that you can’t get access to your money until your policy matures. What’s more, since you’re unable to get hold of your money for a while, mutual funds pay higher interest than regular savings accounts, meaning you ultimately get more money.


You Don’t Set Financial Goals


Setting financial goals is an important part of adult life. They’re a way of keeping score and making sure that you’re on the right track. What’s more financial goals can serve as excellent motivation, especially when you’re eyeing up all the things that you want to buy.


When it comes to financial goals, you want them to be ambitious, but you don’t want them to ruin your life. Yes - it would be great to save $1,000 a year. But you also need to set yourself shorter, more achievable goals, like saving $50 from your next paycheck. Doing this will get you into the habit of winning and achieving your goals, motivating you to go further.


You’re Ignoring Retirement


Unless you’ve got freaky genetics and are on an amazing diet, there’s a good chance that by the time you hit sixty-five, you’ll no longer be able to work. It seems like retirement is a long way away, and so you don’t bother saving for it in the here and now, but it could come back to bite you in the future.

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Overspending early on in life is a real phenomenon. It represents a missed opportunity to save for retirement now could mean that your pension income is low. According to Forbes.com, starting to save for retirement when you’re 25 rather than 35 could add thousands of dollars to your retirement nest egg.