4 Money Saving Tips on How To Identify Unnecessary Spending

When we spend money, we often class the expense into one of three categories: wants, needs and investments. While our wants and needs are often easily defined, our increasing tendency to classify spending as investments can sometimes lead to increased and potentially unnecessary spending. Ask yourself if you’re using the idea of investment as an excuse to justify unnecessary spending.

When is spending really an investment?

Aside from more formal financial investments such as property or shares, many of us spend money on things like health, education or even leisure under the guise that we are investing in ourselves. This is not to say you shouldn’t invest in such things. However, if you are working towards a savings goal or struggling with debt, it can be useful to look closely at your expenses and define them more clearly.

Identify the returns

When it comes to things such as health, it can be very difficult to identify investment returns because for many of us it is the lack of a problem that signals success. In other areas however, such as education, it can be easier to compare the financial investment with the financial benefits produced. Because you may be dealing with returns that are not financially based, try to define the returns by how beneficial they are to your health, skills, etc. and whether you feel they are worth the financial outlay.

Beware the pitch

When you think about it, any expense could be classified as an investment, so it is vital to consider the source of the information. Ask yourself how greatly the purchase will benefit you and whether you actually need it. It is also important to consider additional expenses, the longevity of the product or service, as well as non-financial costs such as motivation or time invested. It can also be useful to consider the consequences in not making the investment at all. Are they detrimental or simply not additionally beneficial?

Consider alternatives

There are many ways to reach the same goal, so if your mind is set on investing in something, be it your physical or mental health, your skills or knowledge, try to consider alternative methods of reaching the same goal. Often we think that more expensive means more returns, but this isn’t always the case.

Source: http://blog.commbank.com.au/your-money/the-investment-excuse-identifying-unnecessary-spending/

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