Your money – pushing through in 2012

It’s been almost five years since the onset of the United States banking crisis that sent the world into recession. That’s a long time. The question I’m sure that many of you are asking is, ‘What does the financial future hold in 2012?’ Unfortunately most experts are saying that times will likely continue to be tough. There seems to be so much uncertainty and no-one likes uncertainty, least of all the financial markets. But amidst the bleak financial outlook and the big unknown, there is one thing you need to remember, it will not last forever. It will pass…the economy will recover and the markets will rise again. You only need to look back in history to know that I am right. The words of John D.Rockefeller in response to the Great Depression of the 1930s apply equally today as they did then, “These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.”

But what do you do in the meantime? How can you ensure your own financial survival in the economic storm? The good news is that there is much you can do but this month I am going to focus on one of the best ways you can control your expenses. This seems fitting given that you are probably trying to recover from the spending frenzy that too often accompanies the Christmas season as well as the fact that inflation is on the rise again (and inflation means rising prices).

The main way to control your expenses is to learn to differentiate between your ‘needs’ and ‘wants’. When it comes to spending money, we are extremely good at convincing ourselves that we ‘need’ something, when in fact we simply just ‘want’ it! It’s the easiest way to justify our spending. But if we can learn to be honest with ourselves and exercise a bit of self control, we’d probably save ourselves a fortune. Now I am not saying that you should never have any luxuries. You work hard and you should be able to enjoy your money. But you should never compromise your savings goals (which are inextricably linked to your financial future) nor should you get yourself into debt over something that you simply ‘want’. Some good examples are holidays, the latest iPhone and another outfit for your already bulging wardrobe.

Why is it that we think we ‘need’ these things, especially when we can’t really afford them? When we strip the facade away, the truth is that it might be that we:

1. Are caught up in trying to keep up with the Jones’.
2. Comfort shop to fill an emotional need, e.g. loneliness.
3. Believe the lie that these things will bring us happiness when in actual fact the happiness they bring is rather short-lived.
4. Fall for the tricks of the advertising trade…the empty promises of prestige, status, respect, love, etc.
5. Are already way over our heads in debt so we simply give up.

We have made our lives too complicated. It’s amazing how much less you really need to live on and be happy at the same time. So what can we do to tackle this sort of spending? The best ways are to:

1. Sleep on it. In other words, don’t buy on impulse, walk away, sleep on the decision and see how you really feel in the morning.
2. Ask yourself whether you really do need it or simply just want it.
3. Shop according to your budget. Include in your budget money for your ‘wants’ and where necessary, save this up for a few months to pay cash.
4. Find cheaper alternatives that you can realistically afford.
5. Be accountable for your spending, whether to your partner or a good friend. It’s the things we do in secret that have power over us.

While it is true that we should always spend our money wisely, 2012 is a year where we are going to need to be more vigilant about this than ever. But know one thing, it will be worth it in the long run.