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James Graham
James C. "Jim" Graham is president and owner of Graham Financial Consulting. A native Kansan and Wichita resident since 1954, Jim spent over 15 years in the Navy's technical training system as a technical instructor, curriculum writer, and technical school administrator. After retiring, Jim was an insurance agent and taught licensing courses in California. He returned to Wichita teaching advanced electronics and math at the W.A.T.C. Seeing a need, Jim began Graham Financial Consulting to provide personal money management education, as well as consulting on home-based business development, individual credit repair, and Life and Health insurance. Call Jim at (316)773-0831 or email jcg.debt@powwwer.net
Banking & Finance
2003-10-01 09:00:00
How can I control my spending?
: I really appreciated your last month's article on how money works.  Do you have some tips for me to help me keep my spending under control?
ANSWER:  Well, this is a very common situation that a large majority of individuals find themselves in each month, and the reason so many individuals get into debt.  Uncontrolled spending is one of three main areas that directly affect personal debt.  The key to solving this problem is the process of "tracking the spending", and when you track your spending, you control it.  To properly control spending, you first have to realize that spending is emotional, and once we accept this, then we can set priorities on how the money can be spent.  By setting spending priorities and tracking the spending, we are taking tremendous steps in removing the problems that lead to personal debt. This process of tracking spending can be very tedious, but it is absolutely essential in getting your total personal finance program under control and proceeding into the next step of debt management and elimination.  One excellent thing to remember is that by using the process of tracking spending, the average family can find $200-$300 in wasted spending each month, and sometimes more.  When I mention the process of control spending, it's not so much the fact of having to resort to "starving" on the food bill or completely eliminating large numbers of items in your budget, but instead, it requires you to make some very logical decisions, and deciding if the items that you are purchasing and the way you are purchasing them is of the "need" or "want" basis.  A majority of times, it is as simple as rearranging our spending habits and using a little process thinking.  It isn't always a matter of cutting back, but a lot of progress can be made simply by setting the necessary priorities and not repetitive buying.    Take the following example I refer to often using the food budget.   Usually at the first of every month, we sit down and make our grocery shopping list of items needed for the month or every two weeks, which ever is the time frame for purchasing groceries.  Let's say that we spend approximately $150 every two weeks for a family of four.  We get the groceries home and put away and are usually tired, so we go out to eat.  What we have just done is the best example of how to start in the process of "control spending."  While we are enjoying our meals in our favorite restaurant, we have just spent $150, plus the price of the meals which for a family of four could be approximately $40-$50 depending on where you were.  So, for the first part of the month, we have spent $190-$200 for eating.  Suggestion- why not establish nights that you want to eat out and buy your groceries around that schedule?  You'll be surprised how much you can save, particularly when using the options of coupons and buying large quantities.   As long as we are on the subject of groceries, we need to provide some options, such as: buying large quantities, dividing up the portions for separate meals, or using the proper use of coupons and double coupons.  All of these little items can definitely up to be very significant in properly managing the budget.  If an individual was to save only $10 a month on the food bill, they could apply that $10 either to savings or debt reduction.   Although I have just addressed one area of spending, it is an area that provides several options for savings.  There are other areas that can be addressed such as, the amount paid for insurance premiums and saving on healthcare.   These are just a few of the areas that can produce even greater amounts of saving when tracking is implemented.   The next and probably most important matter is controlling spending is the ability to set spending priorities.  Too many times we purchase items that we want instead of need.  Now there is nothing wrong with buying something we want, but the matter of need should take precedence in managing our spending.  We as a society have the unique ability of buying what we want, and being able to justify it as a need.  This explains why at the end of the month we have too much month and not enough money.   According to the School of Consumer and Family Affairs at Purdue many consumer purchases are made on impulse.  One of the best ways to properly manage spending is to base your spending decision on the following three elements: 1) Utility - Do I need or want this item?  Does the item being purchased do what it's intended to do? (i.e. color, flavor, power, dependability and performance) 2) Availability - Can I satisfy the vendor? (i.e. money in my pocket, checking account, credit card, loan, lease, etc.) 3) Affordability - Can I afford the item? Will it require financing on a long term?  How much will I have to pay in interest?   Last, but not least, is the matter of how we spend money using credit cards.  Credit card spending is probably the most misused and is the biggest cause of consumer debt.  The reason for this is that we don't properly manage the use of the credit card.  For example, don't ever buy anything that is consumable (food) on a credit card unless you plan to pay the entire amount off at the end of the month.  That very small purchase of bread and milk on the Visa, at 19% interest, could end up costing you 3-4 times the amount if the bill isn't paid at the end of the month.  One of the best ways in the proper use of spending is the use of the 'Debit Card.' This provides a way of tracking your spending via your check register.     These are just a few of the problems that people run into in their daily life, and unfortunately, these problems result in a greater problem of personal debt, because of the mismanagement of spending.  Remember, tracking your spending and setting spending priorities is the first and best process in debt elimination.
 
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