Impulsive spending needs to be stopped if you are to be in control of your finances. You must learn to budget and differentiate between needs and wants.

The desire to buy things because they seem like a bargain or they just seem desirable need to be stopped. You must learn immediately to determine between what is a need and what is a want. To regain financial control you must question yourself every time before you purchase: Is this a need or a want. For people in great financial positions buying wants is no problem, but you must be in that position first.

Needs are items or services that are essential to life eg: healthy food toiletries, cleaning, limited clothing, school fees and moderate transport.

Wants are things we buy to make us feel good, look good or for entertainment. Eg: hiring a DVD, buying a pair of shoes when we already have 3 perfectly good pair, getting a manicure or massage etc etc etc.

After you have gained control of your spending and reduced spending on needs it is important to reward yourself in small ways for the discipline you have shown. If you really love having a massage, then perhaps get a $50 massage every time you pay $500 off your credit card debt.

 

Learn To Buy Assets Not Liabilities

These are explained in the Assets v Liabilities and the Income section. After you eliminate all Credit Card Debt and get your loans under control it is important to begin buying assets or income.

If you lost your job today how long could you live and where would your income come from. Diversifying your income buy investing in assets is a fantastic risk management process. You will not always get it right and you will learn as you go, but ultimately what's more likely to go down in value, a blue chip stock or a pair of shoes.

Changing your spending habits towards purchasing assets rather then consumable items or liabilities is the key to long term security.

Study this diagram and decide which spending pattern is best for you financial health.

Clearly a spending pattern that continually gives you new and growing forms of income is the way to go.

Good and Bad Expenses

Just as there is good and bad types of income there is also good an bad types of expenses. Speaking from a purely financial perspective bad expenses are those items that we simply pay cash for and get dome material item, consumable item or service that declines in value .

Good expenses however are those that we spend money on with the intent or expectation to gain an increase in the value of the item purchased or earn income from the item purchased. Some examples of good expenses are investments in shares or property that return positive cash flow and are expected to grow in value. Also items like seminars or ebooks, software that you fully expect to make a commercial or financial gain from.

In the income section of this site I recommend several products including Maverick Money Makers. And while some people would regard that as an expense I regard it as an investment or good expense for several reasons.

Firstly I have made a lot of money from the product and anticipate to make a significant amount more from it. Secondly it was a low risk purchase because it had a 60 day money back guarantee. Thirdly I bought it fully expecting to be able to make far more then the $97 it cost me - and I was correct.

Be cautious however as there are many scams and half baked ideas out their promising to make you money. Research the product and stick to those products with good reviews in forums and that have money back guarantees.

When Spending On Bad Expenses or Liabilities

Obviously you cannot and should not go through your life without some of the things you enjoy. But it is important to also recognise that just the same as some people get a high from spending, you can retrain your emotions to get satisfaction and self esteem from being content with what you have.

Once you have control of your budget and debts then when you do chose to purchase or spend on consumer items it is EXTREMELY important that you don't purchase liabilities.

 

Avoid at all cost - Low Money Up front with continuing repayments. Pay cash up front. If you cannot afford to pay cash, you cannot afford the item in the first place. Its really that simple.

 

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Disclaimer - this information is general in nature and does not take into account your individual circumstance. You should always seek professional independent advice prior to acting on this information or making any decisions based on this information.