5 tips to eliminate the habit of wasting money

Knowing and applying financial management skills will help you move towards financial freedom, no longer dependent on money.

Wait before you buy

Tom Holtam, vice president, senior regional distribution director at UMB Bank, USA, said the most important habit to have a positive relationship with money is to have discipline in spending.

“When you find something worth owning, take some time before you buy it,” Tom Holtam advises. “It’s a silly idea, but it works. After that time, you realize that there are things you don’t really need to buy at all.”

According to Tom Holtam, this simple trick can help you avoid impulse buying.

Monthly budgeting

"Make a monthly budget and stick to it," Holtam recommends. Budgeting helps people see where their money is actually going and how much they can spend each month between what they need to spend and what they have.

Accordingly, there are three simple methods that are easy to implement. The first is the 50/30/20 principle when dividing income into three main categories. 50% for essential needs, 30% for personal needs and 20% for investment, savings and debt repayment.

The second method is envelope saving, where you divide your cash income into different envelopes based on your available budget. Each envelope can be adjusted to fit your spending categories. Fixed expenses such as rent and car payments are not included in the envelope.

The final method is to budget from zero at the beginning of each new period. All expenses are analyzed from scratch and built upon what is truly necessary for the upcoming period.

Mindfulness with money

Mindful spending is about being aware of your spending, where your purchasing decisions are informed by self-awareness. Mindful spending is not about the size of your spending. According to Holtam, it is an important tool that can help guide a person’s financial strategy throughout their life.

The first step to being mindful with money, he says, is to figure out what kind of life you want. To figure out what kind of lifestyle is right for you, Holtam recommends trying this exercise:

“Take an honest look at your current job and the salary or wages you’re being paid,” he suggests. “Then think about using your budget to figure out what makes you happy.”

For example, if traveling brings you joy, you can cut back on groceries and other expenses to afford airfare and hotel stays. Conversely, if you're someone who enjoys staying home and cooking, your grocery budget can be higher each month, Holtam says.

Be grateful for what you have

Half of managing money is spending, says Nicole Stanley, a financial coach at Arise Financial Coaching, so try to be grateful for what you have, even if it’s boring. She says thinking about what you’re grateful for can make you happier and less likely to buy things you don’t need.

Nicole Stanley suggests some gratitude ''mantras'':

- I am grateful that I can pay my rent and that I have a safe home.

- I am grateful to have paid for this health check, and now I know I am in good health.

- I'm grateful for the full tank of gas, so I can get to work without worrying about breakdowns.

Budget for the worst

Most people budget with the best-case scenario in mind, says Nicole Stanley. Instead, switch to budgeting for the worst-case scenario. "Budget generously, but spend conservatively," Stanley advises.

Budgeting generously means if you think you'll need $75 for gas this month, budget $100. Whatever you think it will cost, budget more than that. This is a defensive strategy, but it's smart for budgeting.

Stanley says that by using this budgeting strategy, two things can be achieved:

- When you pay your bill and see it's lower than your worst-case scenario, you'll feel financially better about paying less.

- There will be a rush of dopamine (happy hormone) to the brain. You are prepared for the worst and are benefiting from staying under budget.