Your relationship with money dictates your spending habits If you’re a high income earner or not, your spending habits will define how much you save, how much you invest, and whether or not you are financially secure in your future.
I’m a high-income earner, but like many in the medical field, I also carried a large burden of debt. When you have a lot of debt, your high income is basically void because so much of your paycheck is allocated to those payments. On top of that, where you live, in a high cost of living area vs low, or in a state without income taxes vs one that does have an income tax, can eat into your earnings.
So, with a low income, you have less to work with; with a high income you may also have higher debt and therefore less to work with than you imagined. In effect, no matter what, your spending habits will dictate your financial present and future.
As someone who managed to pay off all my student loans within a year of starting my job, and went on to buying a house a year after that, I wanted to share some of my own spending habits that have helped me get to where I am today.
1 – Pay off Debt, and Avoid Accumulating More
You haveeeee to stopppppp taking on more debt. Pay off your credit cards each month; put extra payments towards your student loans (if you can); don’t take loans to buy things you don’t need. A prime of example of that is a new car. It’s the worst purchase you can make because it depreciates as soon as you drive it home.
Instead, make conscious choices to use what you have until you can no longer use it. When you decide to take on new debt, then make it the least amount, or at the best interest rate as possible.
Also, remember, the less debt you have the better interest rates you get.
My own story: I drove a 2003 model car for two years after becoming an attending physician (I graduated from training in 2016). My “upgrade” in that area was my brother’s old car which he got rid of because he didn’t need it anymore. I currently still drive that car and have no intention of getting another. When I do decide to buy another, it will be used.
A part of sticking to this is developing a mindset that helps you look for bargains and avoid lifestyle inflation. You may want all the nice new things, but you don’t NEED them. You may be able to afford to take out a new loan to help you upgrade or keep up with your image of the perfect life, but you don’t NEED those things to be happy. This isn’t to say that you can buy new or nice things for yourself; the idea is to make sure its something you can truly afford. If you can’t, save up for it, or wait to find a discount.
2 – Pay yourself first
Literally, everyone says this, including me. But, what does it mean?
It means save first, invest second, spend later. This is probably the best spending habit you can develop for yourself.
Savings include emergency funds and retirement savings. I also include your living expenses each month with your rent/mortgage, utilities, internet….basically what you need to keep a roof over your head. I include these in savings because these costs are required and you need to make sure you set aside that money each month to make your payments on time.
Investments include stocks, bonds, mutual funds, and ETFs. There are plenty of non-stock market investments you can make as well should you desire to branch out and do something different. Investments are not required, however, if you have extra money this should take precedent over spending for fun. Why? Because it allows your money to make money for you.
Now, spending for fun. Do whatever you want, so long it matches with your own priorities. Don’t go around buying things to keep up with the Jones’, because you’ll never catch up. Prioritize what matters to you and your family and what makes you truly happy deep down.
3 – Use Different Services To Your Advantage
There are ways to get money back, get free money, and earn discounts. Use them. Make it a point to look for them to support your frugal living goals. There’s no reason to ever pay full price for anything, and you won’t know how much you can save unless you make looking for deals the norm.
These examples listed are just the tip of the iceberg. Hopefully, it inspires you to check outhe different areas of your life and expenses and look for ways to save.
I put all of my purchases on my credit cards. I have the American Express Platinum and Chase Sapphire Preferred.
I use my cards for everything in order to gain points from my purchases. I then use the points for cash back or for travel credits. I’ve saved hundreds if not thousands of dollars over the years by doing this
In order to take advantage of credit card points though, you really need to understand the benefits of the different ones. The Amex Platinum is a great travel card; I book all my travel purchases here, plus expensive items so that I can utilize the points earned towards travel (in case you can’t tell, travel is my jam).
The Chase card I use for basically everything else. Every so often when my points balance is high enough, I’ll credit myself with cashback and save on my monthly bills.
These cards are just two examples of the many options out there. Some cards offer automatic cashback by the percentage of your total bill. Many of them don’t have annual fees. The point here is that using them can give you perks and help you save money, often without any extra cost. Plus, you’ll build up your credit which is always helpful when you start taking on that debt for big purchases 🙂
Example of how different cards compare: Types of Credit Cards
If you’re the type of person who can’t control themselves with a credit card, then I don’t recommend using them. In addition, I endorse them for their benefits, but it’s only worth it if you’re able to pay off your bill each month in total – don’t carry a balance. Doing so will just negate the perks and contribute to continued bad spending habits.
Discounts and Cashback options
Services like Rakuten (formerly Ebates), Honey App, Ibotta, Fetch all work. They give you points, or cash back on things you would normally buy anyway. So, why not take advantage? It’s pretty much free money and using their services is also free.
For instance, I recently ordered a “trunk” from Nordstrom’s Trunk Club. Rakuten had a cashback coupon available and I earned back $10 from my purchases. Once a quarter Rakuten sends you a check in the mail. These are things I’m buying anyway, and if you’re an online shopper you can really get a lot of money back. I know $10 doesn’t seem like much, but it adds up really quickly.
Coupons are also a great way to save. I always forget to use them, and you don’t have to be an extreme coupon-er, but it’s definitely a great option to save.
Shop During Certain Times of Year
In the spring, all fall and winter clothes are on sale; in the fall, summer clothes go on sale. Now, if you’re like me and don’t need to have all the absolute latest fashion trendy outfits, use these times of year to do the bulk of your shopping – especially shopping for fun.
Going back to my favorite store, Nordstrom Rack, their “off the rack” sales are the best. I get so many things and spend waaaaay less than I would other times of the year.
Other examples of this: buy electronics on Black Friday; Use Amazon Prime day to your advantage; buy Christmas wrapping paper the day AFTER Christmas (its like one-tenth of the cost then).
Of course, if you need something you need it, however, for all other instances, use the seasons changing, and use the massive sales and discounts to help you spend wisely.
4 – No More Instant Gratification
Delayed gratification is the new kid on the block. Wait before you buy; research before you spend; think before you splurge.
Yes, its super easy to buy anything through your phone with one click, but make it a point not to. The advantages of this are two-fold:
- You’ll make a better, more informed purchase
- You’ll take better care of it
When you have to wait for something, it retains its value. You’ll treat it better, you’ll appreciate it more and you’ll take fewer things for granted.
Spending Habits: Final Thoughts
Bad spending habits stem from so many different areas of our lives. However, there’s no reason to let them get out of control. These good spending habits can make a huge difference in preventing overspending and improving your savings.
Of course, your longterm financial goals and your current financial situation will determine how much you save, and where you spend. However, I think these spending habits are easily applicable to any person and any lifestyle.
What spending habits have helped you? Share below!
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