Many promise themselves and very few keep it through to the end.... spend less money
and save more.
It's like the good old annual resolution "This year I'll exercise more, eat healthy and lose
weight".
Who does not know it?
;) But why do you set yourself the goal if you don't follow through in the end anyway?
To stop the paycheck to paycheck cycle, to retire earlier, to invest more, to fly on
vacation again or to have no more financial worries...
Whatever your reasons are to spend less money, in the end many have to realize that they
didn't follow through again and the money is gone again at the end of the month.
Have you ever wondered why this is so hard for you and how you can change it for good?
So if you're someone who has trouble managing their money carefully and have been putting
off changing this for a long time or you've tried to change it many times but always failed,
you should definitely stay tuned because in this video we're going to show you why you're
overspending and how you can change that so that your financial situation can completely
change like a snowball....
Once you start the ball rolling, it never stops!
But before we get to the main topic of the video, first of all welcome back and if you
are new on our channel...
We are the Finance Nerds and we cover topics in personal finance, from saving money to
investing and we support you on the way to your financial goals.
But now let’s dive deeper into the topic!
So why do we spend too much money?
It's because we carry the ability to shop with us at all times.... namely our smartphone.
But that's not the real main reason, because it goes deeper than just having the smartphone
with us, because there's a psychological reason why we tend to spend more and more money.
"It really comes down to just emotions," Kiehl says.
"[Spending] is an attempt to relive or get back to the way a purchase made us feel in
the past, or to kind of mask a feeling."
So that means the smartphone itself only encourages this, and is not the main reason.
The main reason is that we are getting more and more used to getting short-term dopamine
releases and need more and more short-term "rewards", because dopamine can also be addictive
and trigger withdrawal symptoms, just like a normal drug addiction.
That's why there are now movements like Dopamine Detox, where you try to get the dopamine balance
back to normal.
If you are interested in this topic, please have a look at YouTube or Google, there you
will find information about it, but back to the topic.
As you can see, it is not easy for you to spend less money, because both modern technology
and your own psychology are working against you.
In the next few minutes we'll look at how exactly you can finally solve overspending,
why you should find your "why" and how you can make the changes sustainable so that they
really last.
So how exactly can you solve overspending now?
For this we have developed a 5 step plan how you can systematically approach the matter
and additionally change your psychological triggers.
Step:1 Get to know your spending triggers.
Every stimulus is followed by an action and every action is followed by a reward.
This is how the habit loop works, which is created as soon as a stimulus arrives in the
brain.
A stimulus can be many different things: your environment, your mood, the time of day, people,
smells, and so on.
Knowing your triggers is the first important step you need to take to stop overspending,
because how can you stop something if you don't even know your psychological and emotional
triggers that lead to the action?
If you want to learn more about this, you can also save the video above for later.
The easiest way to learn about your psychological triggers is to track your spending and keep
a journal of it, which brings us to step 2.
Step2: Document your spending Documenting your spending gives you clarity
and an overview.
Most of the time you quickly lose track of your expenses, especially the small ones,
and forget about them again very quickly.
Moreover, it is the only way to find out what you spend your money on in the first place
and therefore also the first step to find out your psychological triggers.
Also, our spending tracking sheet will help us a lot for another one, but more on that
later.
So what's the best way to approach this?
You can either do it analog in a notebook or digitally, that's up to you.
The important thing is that you really track ALL expenses and also add notes like: Time,
place, emotional state.
I know, a lot of work especially if you have many small purchases, but the work will give
you a great return on investment in the long run!
Step3: Know your "WHY Now before we move on to turning your financial
situation upside down, this step is about setting the foundation.
On this foundation everything stands and if the foundation is weak, your whole project
will be doomed to fail.
It's about finding out your "why", why you want to change your financial situation and
spend less money......
Of course: you want to have more money at the end of the month, but why do you want
that?
Maybe to go on vacation again?
To retire earlier?
Become a millionaire?
Go on a world trip with your family?
That's exactly what motivates you to keep going and actually follow through with your
future financial changes.
But ATTENTION: Don't stop at 1 "why", go deeper!
Form a "why chain."
So for example, why do you want to retire earlier?
Or why do you want to travel the world with your family?
The more you go deeper, the more you will learn the real reason why you want to spend
less money.
Step4: Budgeting Now it's really about setting your financial
course towards your goal and that's exactly why we need the Spending Tracking Sheet, because
with it we have first of all gained awareness about what you spend all your money on.
In addition, you can also see how much money you spend on which areas.
With the budget we realign your financial situation and prevent you from spending your
money on the wrong things in the long run.
Because our approach to a budget is to give every dollar a job and therefore a meaning.
In that sense, we're still overspending, but only on the right things, like your savings,
your investments, and so on.
To have an easy start without making it complicated use the 50-30-20 budget.
For this you divide your income into 3 areas: 50% for your living expenses, 30% for wants
and needs and 20% for saving, investing and debt payments.
You can of course play with the percentages so that it fits your situation with your set
goals.
For example, if your goal is to retire early, you'll probably want to allocate 30-40% to
savings, investments, and debt payments.
If you want to create a budget, track your spending and investments, and always have
an eye on your net worth, just use our All In One Personal Finance Tracking Sheet.
You can find the download link in the video description and in the pinned comment.
Step5: Create a routine.
From here, the most important thing is to stay on the ball, persevere and don't stop
after 1 month.
How you do that is with routines and habits.
One of our favorite quotes for this is the following: "Success is nothing more than a
few simple disciplines, practiced every day".
Sit down at the end of the week and track your finances, go through your expenses and
income and document them and see if you are still on the right track to your goal.
This is also done relatively quickly and easily with our tracking sheet, if you use this.
Just by looking at your finances on a regular basis, a change will come.
This also means that even if you've done all the steps now, not every week or month will
go perfectly.
There will be days and weeks where you fall back into old patterns and end up spending
more money than you planned and that's normal!
The important thing is to show perseverance and consistency, because these are the keys
to your long-term success.
And before we forget!
We asked you a question in the last video about what you thought the last 2 steps in
our WWM Method were.
Here is the solution again with the Wealth Making Formula!
So the essential 3 steps for any financial success are:
1.
you must save more than the average 2.
you must earn more than the average 3.
you must invest more and better than the average.
And the formula logically then goes like this: (Financial success) = your savings rate +
your income + your investments.
And that's what we're all about on this channel, showing you our knowledge in all 3 areas as
best as we can, so that you can take out what's right for you and use it to work on your financial
success.
And if you want to build a fortune, use these 5 money habits from the video in the middle
now!
If you enjoyed the video hit the like button and if you haven't already, subscribe to our
channel so you don't miss out!
We hope to see you in the next video.