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The seven deadly categories of spending
If you are consistently spending all of your money, leaving you broke and just barely hanging on until payday, you need to do something about that. And soon. To get control of your spending you need to understand the seven basic reasons why you spend money:
REQUIRED PURCHASES: These are items you need to maintain life or to prevent physical misery. Included are basic food, shelter, medical care, basic clothing and taxes necessary to sustain life.
INVESTMENT PURCHASES: Included in this category are savings, checking accounts, stocks, bonds, 401(k), retirement accounts and other means available for storing your funds.
PLEASURE PURCHASES: Goods or services purchased to bring pleasure, fun, excitement, happiness and intellectual stimulation into your life.
CONVENIENCE PURCHASES: Things and services you pay for to make life easier or to save you time and hassle, like household appliances, dry cleaning services, cell phones, computers and so on.
EGO PURCHASES: This category is really an evil spin-off of the pleasure purchase category. Ego purchases are those made solely for the sake of showing off, as status symbols: An oversized home, an expensive sports car, a giant plasma TV. These all come with a big monthly payment that quickly sucks away the pleasure.
TRADITION PURCHASES: This is a sickening category that includes any purchase made without rational thought, simply to be "normal." These are expenditures made so you'll "fit in" at work, or items you almost never use, like the "good" china.
GUILT PURCHASES: This category is similar to tradition purchases, but the irrational motive here is guilt. Gifts given because you believe you have to give them in order to meet others' expectations are guilt purchases.
In past columns I have challenged you to take control of your finances by tracking how you spend your money. That means keeping a simple written record, day in and day out, of your expenses. Recorded on something like an index card (one card per day), a Daily Spending Record shows you exactly where your money goes. It requires two entries for each purchase: "What?" and "How much?" Now you need to add a third entry: "Category." Of the seven purchase categories, the first two (required purchases and investment purchases) are almost always winners. The second two (pleasure and convenience) are neither winners nor losers, while the last three (ego, tradition and guilt) are the debt-makers.
Take a few minutes to have a heart-to-heart talk with yourself. Think about the purchases you've made in the past that had a negative impact on your financial health. Funny, isn't it, how the purchases we regret the most are higher in the purchase category chain (categories 5, 6 and 7 -- ego, tradition and guilt)? As you begin to see your purchases by category, something wonderful is going to happen. You'll change the way you spend your money, making it possible to take back control of your life!
by: Mary Hunt, from "The Cheepskate Monthly Newsletter"
Spending categories
