Tag Archives: Budgeting Advice

How to Break the Emotional Spending Cycle

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If you’ve ever opened a shopping app after a stressful day at work, had a conversation that didn’t go as planned, or you received bad news – you’re not alone. Shopping after experiencing difficult emotions is more common than you might think. But if clicking check out on your online shopping cart temporarily gives you a rush of excitement and is then quickly replaced with financial consequences and feelings of regret – you’re most likely engaging in emotional spending. Let’s learn what emotional spending is, why we do it, and how to overcome it.

What is Emotional Spending?

Emotional spending (sometimes nicknamed “retail therapy”) refers to purchases that are driven by emotions rather than your need for the product or service. It’s different from typical discretionary spending, like when you buy the new golf clubs you’ve been planning to buy and that you’ve budgeted for. In this state, shopping is a way to relieve feelings like stress or loneliness.

Emotional spending isn’t always a large purchase. It can be frequent, small purchases in grocery checkout lines or even late at night. It can look like ordering takeout after a long day, even when you already have groceries at home. It can be impulsively purchasing everything in your Amazon cart because it will make you feel better, even if you know you can’t afford it. Emotional spending does not always begin as a problematic habit – it’s a common behavior that can have serious financial and emotional consequences if it becomes one.

Signs of Emotional Spending

  • The impulse to go shopping comes after experiencing an emotion like stress or boredom.
  • You feel a short-lived sense of relief after making the purchase, which is later replaced by guilt or regret.
  • Your spending has caused you to accrue debt, deplete your savings, negatively impact your credit score, or worse.
  • Spending causes conflict with family, friends, or significant others.
  • You continue to repeat the pattern, even though you are aware it has had a negative impact on your financial health.

What Causes Emotional Spending?

Research has shown that shopping makes people feel good – every aspect of the transaction from browsing, to imagining, to finally owning the product. According to the Cleveland Clinic, this is because shopping releases “happy hormones” that encourage us to keep engaging in the same behavior. We feel temporary relief after shopping, so we keep doing it.

How to Overcome Emotional Spending

1. Track Your Patterns and Address Them

Do you know what gives you the urge to buy things? Maybe you notice a pattern of shopping after a difficult day at work or you reward yourself after reaching a goal.

Consider using a journal or app to track when the urge to spend arises and what caused it. By addressing the root cause of the spending, you are more equipped to recognize  a pattern and redirect your focus.

2. Implement a Spending Rule

Consider hitting pause before buying the item. Give yourself a set time to wait before making an unplanned purchase, or longer for bigger purchases.

During this waiting period, ask yourself a few questions:

  • Do I really need to make this purchase or am I shopping to relieve the emotion I’m feeling right now?
  • Does this purchase fit into my budget?

When the time is up, you may discover that you don’t need the purchase. Your desire to  buy the item might even disappear completely.

3. Set a Discretionary Spending Limit

If your budget allows for it, set aside some “fun money” you can use for wants. By deciding how much you can comfortably afford to spend, you can shop without feeling guilt or regret.

Need to create a budget? Check out our fillable budget worksheet to calculate what you might have left to spend after your total monthly expenses.

4. Set Financial Goals

Having clear, meaningful financial goals can make you think twice about buying something you don’t need. When your money has a purpose, you might be more likely to reconsider non-essential purchases – because that money can get you closer to reaching one of your goals.

5. Find Alternative Activities to Handle Emotions

Both negative and positive emotions can lead to overspending. When those emotions arise, try replacing shopping with another more productive activity.

Breaking the habit of emotional spending can feel overwhelming, even if you recognize the negative consequences it has on your daily life. However, breaking the cycle can help you experience improved financial well-being.

For more financial advice and money management tips, subscribe to our First Scoop Blog.

5 Things You Can Do to Live Below Your Means

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Living within your means is one thing, but living below your means is a completely different challenge. Successfully living below your means opens doors to significant savings and debt reduction so you can one day reach financial freedom. According to a recent CareerBuilder survey, 78% of U.S. workers live paycheck to paycheck, and over a quarter do not save any money each month. These alarming statistics highlight the importance of financial discipline, especially when planning for the future.

Living below your means is a crucial step toward financial stability. While it may seem daunting, it is achievable with the right strategies. Here are five practical tips to help you live below your means and take control of your finances.

1. Dissect Your Discretionary Spending

Understanding exactly where your money goes is the first step to controlling it. Start by analyzing your discretionary spending, which includes non-essential expenses like entertainment, dining out, and hobbies. Scrutinize every transaction to identify patterns and pinpoint areas where you can cut back.

Use statements, credit card bills, and other financial records to track your spending habits. With First Financial’s Online Banking, you can view all your spending in one place. You might find that certain purchases like frequent takeout meals, are unnecessary. Recognize these spending patterns and make adjustments, such as cooking at home more often – to save money.

2. Create an Effective Budget and Stick to It

A well-planned budget is your roadmap to financial success. Now that you have pinpointed unnecessary expenses, you can put together a budget that includes only the necessities. Begin by determining your total income from all sources. Next, track your monthly expenses and categorize them into fixed (i.e. rent and utilities) and variable (i.e. groceries and entertainment) costs. This budget should ensure that your spending is well below your income and that some portion each month is placed into savings and/or used to pay down debt.

The key is to find a system that helps you manage your spending and stay on track. First Financial offers various tools and resources, including an in-depth home budget calculator and a simplified budgeting worksheet, to assist you in this process.

3. Pick Up a Side Hustle

Sometimes, cutting expenses isn’t enough to balance your budget. In such cases, increasing your income can make a significant difference. Consider picking up a side job that leverages your skills and interests.

With the internet, opportunities for freelance work – such as writing and graphic design, or tutoring, are abundant. Identify what you’re good at and explore how you can turn it into an additional income stream. A side hustle not only helps you cover expenses, but also provides a financial cushion for savings.

4. Pay Down Debt

Debt can be a significant barrier to financial freedom. Focus on paying down your debt systematically to avoid high interest and late fees. Prioritize high-interest debt first, while making minimum payments on others, to reduce the overall interest burden.

Maintaining timely payments helps you keep more money in your pocket, which can be redirected toward savings or other financial goals. An effective budget and financial plan can assist you in managing this balancing act.

5. Stay Aware of Lifestyle Creep

Lifestyle creep occurs when your spending increases along with your income. Avoid this pitfall by remaining conscious of your spending habits, even as your financial situation improves.

If you pay off debt or receive a raise, resist the urge to immediately upgrade your lifestyle. Instead, revisit your budget and consider how the extra funds can be used to bolster your savings or pay down other debt. Making thoughtful adjustments ensures that your financial growth is sustainable and aligned with your long-term goals.

Let First Financial Help

Living below your means is not about depriving yourself, but about making smarter financial choices that lead to long-term stability and peace of mind. By successfully living below your means, financial freedom is possible.

For personalized financial advice and more tips on managing your finances, call 732.312.1500, visit a branch, or explore our services online.

Could Your Budget Handle a Decrease in Income?

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One of the most difficult situations to deal with is a decrease in income, especially if you are like many Americans of late – living paycheck to paycheck. Many of us base our lifestyle around and live right up to the limit of what our income can afford us to purchase. Living this way can really hinder your budget no matter how much you bring in.

However, spending above our means and not sticking to a budget can really be a problem – because what happens if life throws out a curveball? This unfortunate instance happened to many Americans this year during the COVID-19 pandemic. Here are a few ways to make sure you are financially prepared should you ever experience an unexpected income drop.

The Importance of a Variety of Income Sources

One of the best ways to handle a potential loss of income is to build up income from various sources, if possible. This can be important so that you aren’t relying on one source of income for everything.

If you don’t make as much as you’d like in your daily 9 to 5, starting a side business or part-time job in order to be able to fall back on additional income can be a help. Try to consistently save some of your extra income when times are good so that you are prepared the next time a crisis happens.

What Can You Cut from Your Budget?

It’s important to know which items you would cut in a pinch from your budget if you had to. It’s also good practice to plan ahead of time and figure out where you could cut back if you ever needed to.

Look at your spending patterns, and figure out what is most important. Items such as groceries and bills are necessities, and will need to be managed even if you are making less. However, dining out and added services such as cable can always be temporarily cut from your budget if you needed to.

Review what you spend money on currently and start to get prepared. You could even think about cutting back on some of that spending now, and put it aside in your emergency savings fund to be ready for a rainy day.

Do You Have an Emergency Fund?

This is one of the most important savings accounts to ever have. An emergency fund’s purpose is to be a safety net in the event that your income takes a cut, and you no longer have enough money to meet your current financial obligations. When you have somewhat of a buffer saved in the bank, you’ll feel better prepared and less stressed should you experience any sort of financial emergency. Continue to save what you can and keep putting it away into your emergency savings account – every little bit helps!

Article Source: Moneyning.com

How Much Do Your Financial Vices REALLY Cost?

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What is one thing you just can’t live without? That little indulgence that helps you make it through the day. For some of us, it’s a jolt of caffeine. For others, Netflix and Hulu offer a sweet escape from the hustle and bustle of everyday life. What we sometimes fail to think about, is these little escapes can be a drain on our wallets. Here are some ways you can cut those costs.

Coffee/Energy Drinks

The mid-morning slump, the mid-afternoon slump, and the post-mid-afternoon slump. The idea is that sometimes the day seems to drag on for way longer than seemingly possible. Some people reach for the nearest Starbucks to replenish their energy reserves, while some crack open an energy drink in the hopes of pushing through the rest of the day. What neither often considers, is that these sources of liquid energy can really add up. The average price of a cup of regular (non-latte) coffee from Starbucks is $1.89, and that’s only the average – some areas will be much higher. That may not seem like much, but consider this: an American who drinks coffee at home will save approximately $427 per year over those who regularly visit coffee shops. When we look at energy drinks, on average they cost anywhere between $2-$4. They can be almost double the cost of coffee. A cheaper alternative – green tea! If saving money is high on your priority list, put your at-home barista skills to work.

Subscription Services

From snacks to pet toys, a new wardrobe, and everything in between, there is a subscription service for it all these days. Many in fact, sometimes forget what they have subscribed to, leading to a big bill each month. Arguably the most common subscription is Netflix, which will cost you around $12.99 a month (if you only want the standard package). Add in Hulu ($5.99), BarkBox ($22), and StitchFix ($20), and you now have a monthly subscription bill of slightly over $60. See how fast that adds up? Not to mention the ever-popular meal subscription services can run you about $200 a month. While these modern conveniences are well…convenient, they are also pricey. Most of us don’t want to give up our Netflix, and that’s fine. Take a hard look at all your subscriptions. Are you getting your money’s worth? Do you eat all the meals from the meal kit? Do you keep enough from StitchFix that the $20 a month fee is worth it? Odds are, you’ll find one or two subscriptions you can live without. Your quality of life will stay the same, and you’ll save money too.

Take Out

Do you look at a recipe and instantly get woozy? Cooking isn’t for everyone, and take out can taste great and you barely have to lift a finger to get it nowadays. Before you pull up DoorDash or GrubHub, consider that the average household spends $3,000 a year dining out. That’s no small amount. On closer look, a prepared meal at a restaurant costs on average, $13. Compare that to the average cost of groceries per person for an at-home meal…$4. Yes, that is a $9 savings just from eating at home. The good news is that anyone can cook. All it takes is a little preparation. Plan your meals, choose easy recipes, and don’t expect every meal you prepare to be a Michelin-star experience. Casseroles are an easy meal that is also inexpensive and tasty. If you are completely opposed to cooking, be responsible with your take out. Choose locally-owned businesses and restaurants so that your money is stimulating the local economy. When you use a delivery service, you aren’t just paying for the food. Your total also includes a service fee, tax, a delivery fee, and a tip. Many times your order total will be double. A recent study showed that your meal will cost you 32.8% more when you order food from DoorDash vs ordering directly from a restaurant.

Online Shopping

“Add to Cart.” The temptation is always just a click away. Surfing the net can bring some expensive side effects as you see a constant flood of targeted ads. It’s like they know exactly what you’re looking for. When an online retailer meets your wants and needs (and at such a deal), it becomes hard to pass it up. And free shipping? It can more than likely be a trap to get you to continue to spend. Sure, you are getting good deals on your online purchases, but this can also make you feel like you can buy just one more thing. Soon, your whole budget has been blown on online shopping. There are many ways you can curb this habit. For starters, make sure to delete your payment information from auto-populating in services like PayPal and Amazon. Secondly, set strict limits for yourself. In your budget, set aside some funds for online shopping. If you know this is the only money you have to splurge, you might think twice before clicking “complete purchase.”

If you do any of the things above, the first thing to remember is not to get discouraged. A cup of coffee or a new shirt never hurt anyone. With most things in life, our financial vices are all about moderation. We wouldn’t expect you never to visit a Starbucks or get take out ever again. Set realistic goals for yourself and hold yourself accountable, you’ll be amazed at the savings. At First Financial, we are here to help you reach your goals and attain financial stability. To get started, check out our handy budgeting guide.

How to Create a Budget and Make Your Money Work for You

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Budget. Did you just get cold chills reading that word? It’s not a popular word, and it’s certainly not a popular idea. Typically, the idea of a budget is enough to take away any sense of fun you might have when thinking about spending your money. But, it doesn’t have to be.

There are several benefits to creating a monthly budget. When you have a budget in place, you instantly:

  •     Make your money work for you
  •     Assign each dollar in your account a job
  •     You get 100% control of your money
  •     You can track your expenses
  •     You’ll relieve some of the stress that finances can bring
  •     You will create a “safety net”

There are obvious benefits to creating and maintaining a budget, and there are just as many tools to help you budget as there are benefits.

So, where do you start?

First, figure out how much you make each month. Then, figure out how much you spend. Once you figure out what you’re bringing in vs. what you’re spending, you can start creating specific categories for your money. This is where you get to tell your money what to do.

Now, you’ve got a basic budget in place. You know what you’re making, what you’re spending, and your money has a specific goal. But, how do you keep track of all that information in a manageable way?

Budget apps! The great thing about budget apps – not only do they keep track of your budget, but you can take them with you everywhere you go. Check out some of the best budgeting apps for 2020.

Wally — Get the details of all your financial activity in an easy-to-digest template. Categorize spending destinations, set goals, and create charts. Wally provides you with the full picture of your account in a simple and colorful template. Easy to look at and easy to understand, Wally makes tracking and analyzing your financial habits easy.

Acorns — You know how it’s hard to overcome the mental hump of setting money aside? Well, Acorns removes that struggle from the equation. By rounding up each of your transactions to the nearest dollar, it puts the funds into an investment portfolio. This app looks out for “future you” and makes sure you always have a few acorns hidden away for a rainy day too.

Mint – Create budgets, track bills and receive a free credit report when you use Mint. However, it’s the budgeting feature that really makes Mint shine. It allows you to link your bank, loan, and credit card accounts and then uses the information from those accounts to suggest a budget for you based on your spending. Mint takes it a step further by breaking that spending down into categories like “entertainment,” “food and dining,” and shopping. The best part? You’ll be able to see how much you can save by cutting back in each category.

Mvelopes – A popular budgeting method is the envelope system, a style of budgeting, where you put cash in envelopes for different spending categories and when the envelope is empty, that budget category is spent for the month. This is great for people who like a cash only system, but for people who use credit and debit cards, this can be challenging. Enter Mvelopes, an app that makes it easy to follow cash style budgeting in a digital world.

Of course, while you’re downloading apps, make sure you’re using our mobile app! At First Financial, our app allows you to check your balances, transfer money, pay bills, review your spending and deposit checks remotely. Still have questions about budgeting and financial planning? Check out our handy budgeting guide, or make an appointment with one of our member service representatives and let us help get your budget on track!

 

Budgeting Mistakes that are Easy to Make

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Hopefully by now in the second month of the new year, you’ve mapped out your monthly budget and expenses. If not, get started here ASAP.

Once your budget is set, it’s definitely not always foolproof. Here are a few categories in which you might forget to include in your budget, and a couple mistakes that are easy to make so you can be sure to avoid them.

Are you really ready for anything? Did you remember to include an emergency fund when you created your annual budget? If not, this is a big category you don’t want to forget about. If you have an unexpected emergency and you have no emergency savings account back-up, you’ll either be taking money out of other accounts you shouldn’t be touching or racking up debt on your credit card. Either way, it’s going to put a major dent in your budget. If you don’t have an emergency fund, start one as soon as possible.

Do you keep guessing about monthly bills? If you have utility or other bills that vary from month to month, you may have to guess what they may be when you are setting up your monthly budget. When you are estimating bills that change each month, be sure you factor in a number that’s higher than you think it would normally be. This way you won’t short change yourself and you can be prepared for anything that comes up.

Your budget won’t always be fully complete. Most likely, things are going to pop up for the month like a spur of the moment dinner out with friends, or that family member’s birthday gift you forgot to include when you initially crafted your budget. Things like this can really add up on a monthly basis though, if you forget to include them. At the start of each month, sit down and look at all the dates on the calendar for the month ahead. Think about who might have a birthday coming up, if there’s a weekend outing, and so forth. Factor in as many expenses as you can, and if you have a little leftover – give yourself a bit of a buffer just in case anything comes up last minute so that you won’t have to use your credit card.

Don’t forget about annual fees. Look back over what you spent last year if you can. Do you have a credit card with an annual fee, or maybe a gym membership, insurance policy, or warehouse shopping club annual fee? Jot them all down and take note of any annual fees that might be due. Plan ahead and try to set the money aside so you know you are covered when the bill comes in.

Like anything, there is a learning curve when you are first getting used to doing something like creating a monthly budget. Give yourself a bit of wiggle room and if you make a mistake, try to get back on track for the next month.

In addition to our budgeting guidebook above, also check out our online fillable PDF budgeting worksheet here. Come back each month and fill it out for the upcoming weeks ahead!

Article Source: John Pettit for CUInsight.com