How to Develop Smart Spending Habits

The importance of developing smart spending habits is critical at any stage in life. However, when you are retired and living on a fixed income, the matter of moderating spending becomes even more critical. Many seniors are faced with a dire financial situation at some point because of overspending. Fortunately, there are some smart steps that you can take to improve your spending habits going forward and to reduce the likelihood of overspending.


Avoid Automatic Payments

In a study performed by an economist at Duke University, it was revealed that individuals focus more on finding ways to reduce expenses when they physically write a check or are in some other way directly required to focus on the payment amount in comparison to using automatic payments. This may be because focusing on the expense may require more thought. For example, if you set up an automatic payment for a water bill, you may simply see the amount of money leaving your account each month without actually focusing on the expense. When you physically write a check for that expense, you may turn your attention to finding ways to reduce the expense. While automatic payments can help you to avoid late fees and may be more convenient, they are not helpful when you want to focus on developing good spending habits. Remember to regularly look for ways to cut back on all of your expenses.


Create a Healthy Discretionary Budget

One of the more challenging aspects of any budget may be in the area of discretionary spending. This is spending on any non-essentials, such as going to a movie, paying for a round of golf or dining out. Everyone wants to enjoy a few fun activities or extras from time to time, and you need to have money set aside for your plans. A smart idea is to create a large budget for this item that incorporates everything from extra clothes and travel to coffee, movies and more. Remember that you can even pick up some discretionary items at the grocery store, so ensure that you allocate all expenses appropriately. You can even pull cash out of your bank account each week or month for this type of expense. Once the money is gone, you must way until the next period to spend money on extras.


Be Alert for Scams

Even when you do your best to stick to a tight budget and to manage your spending properly, scams and fraud can easily result in substantial financial loss. While you could be a victim of a scam at any age, many criminals target senior citizens specifically. Some seniors are not aware of how sneaky scam artists can be, and others are simply too trusting. Remember that an offer that sounds too good to be true probably is. Use the Internet to thoroughly research opportunities before jumping on board. Use the Better Business Bureau, Yelp and other websites to learn as much as possible about a company. If you are not fully comfortable with all aspects of an opportunity, be confident to walk away.


Spending money is an essential part of life, but seniors need to focus on spending money intelligently at all times. When you live on a fixed budget, you cannot afford to make costly mistakes with your finances. Each of these important steps can help you to develop smart spending habits. Remember, however, that you also should be alert for additional ways to improve spending habits that may be specific to your unique situation. Regardless of your age and income level, it is never too late to make intelligent improvements to your financial management habits.