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Control Spending Habits

Controlling your spending doesn’t always mean reducing it; however, more often than not it is the end result. Tracking your spending is the best way to manage your finances, and there are a number of ways to do it. Credit cards and other forms of electronic payment come with the benefit of easy tracking. All your transactions are available on your monthly statement or online. However, a typical credit card purchase, on average, will cost 112% more than if you had used cash.

So is cash better than credit? Well, in a lot of instances it is. Credit cards give you the convenience of on the spot purchases that you can worry about later. With cash, you can only spend what you have. The problem with cash is though, how do you track it? There are plenty of programs out there that are great for tracking your finances; Quicken and MS Money are two that come to mind right away. But do you really have the time or inclination to keep every receipt and meticulously enter them into a tracker?

The good news is you don’t have to track every purchase; you just need to control how much you spend each month. To do this you first need to identify the areas where your spending is not controlled. Usually suspects include groceries, clothing, personal spending and general luxuries. Once you have identified these areas it is time to take control. Withdraw the amount of cash that you think you will need for these purchases and put it in an envelope. Make sure to record the date and amount on the envelope too.

Don’t panic if you find that you run out of money, this exercise is about control, and it takes a few months to show positive results. You will notice that you are becoming conscious of every purchase that you make. Every price tag will represent a percentage of what you have committed to spend, and you will think twice about impulse purchases. Ultimately, you will be surprised by how easy it is to control and reduce your spending when you are parting with real hard cash.