A lot of people keep living from paycheck to paycheck despite increases in their income from time to time. While it is easy to blame this on the economy and unforeseen circumstances, with keen observation, you realize that some people manage to scale through the trenches and secure themselves financially. Which begs the question, what happens to the rest?

The problem is in the difference people’s spending habits.

Economics teaches us that our means are limited while our wants are endless. This explains the irrational tendency to want to spend as much we earn; sometimes even more.  Yet, the moment you get a raise increase in your income, either in wages or fees for your service, your wants also increase. 

The humbling reality is that no matter how hard you try, you can’t buy everything. 

Therefore, wisdom must lead the way when it comes to managing our finances. In other words, we must adopt the culture of smart spending. There is no other way to escape, or at least minimize the pressure that comes with having needs to meet from time to time. 

To become smart in your spending, there are practices that must become rituals for you. If you observe them faithfully, I guarantee you that your finances will take a positive turn and you’ll begin to experience less pressure. 

Here are four ways to cultivate the culture of smart spending:

1. Have a working budget: In a consumer world where commodities appealing to our desire for social validation take the reign, having a working budget is beyond necessary. As regular as the word budget sounds, not everybody gets it right. So, the operative word here is working, not budget. After all, everyone has a plan on how to spend their money. But a working budget is one which works for you, not the other way round. And if your budget must work for you, it must do the following:

1. Factor in your financial goals: Your financial goals include all you want to achieve with money short, mid and long term. It determines how much you spend and save per spend per time. Everyone has different goals according to the stage they are at in life. The financial goals of a family man can’t be the same as that of a student. Let’s assume you are a single young adult. Your short-term goal may be to pay for a short course or learn a skill; this should take you a year or less to achieve. Your mid-term goal may be to purchase a car, which should take you a few years. Then your long term goal may be to get a house. This may take you six to ten years. Your budget determines your savings and spending so as to achieve these goals. Budget helps you to plan towards achieving these goals. 
2. Prioritize your needs over your wants:  This is a challenge for many people as they use both words- needs and wants- interchangeably. Your needs are basic requirements for living and working. These include: food, house rent, transportation. These must come first in your regular expenses and the cost must be as minimal as possible. Your wants include leisure expenses, which must be determined after your basic needs, goals and savings have been concluded. 

This may also require that you make budgets within budgets. For instance, if you want to go shopping for clothes, itemize with maximum price attached. This will help you avoid spontaneous purchase as may be encouraged by sales discounts that deceive you with savings that will ultimately lead to deficits in your finance. 

2. Do a progress review: This helps you answer questions such as: have you hit your savings target? Have you been come up with the funds needed for your project according to set time? Your answer to these questions may mean you have to go back to the drawing board and retrace your steps towards achieving your goals. 

3. Bulk up emergency: In all your savings, remember emergency funds. This can be your rescue in case of unforeseen occurrence that can take its toll on your plans. Even if it does not completely help, it could a long way to ease the pressure.

4. Borrow right: Borrowing can be either good or bad, depending on the purpose. It is okay to take a loan for your education, business or health emergencies. But never borrow for things that only serve your vanity. 

Discipline is the golden rule that guides the culture of smart spending. As you exercise your will power observe these, I wish you nothing but the very best.