Posted by Nancy Hecht, CFP®, AIF®
I have been talking to a lot of first time investors that are in their 20’s, which makes me happy. They were in high school during the crash of 2008 and know that things can change quickly. They watched their parents lose jobs and homes. They are also learning that they have to do for themselves. They still have a bit of a hard time when it comes to spending. Often, I tell them to ask themselves if an item is a want or a need before they spend their money. To make it easier for them to decide, I have shared a few tips.
Carry cash. This is almost a foreign concept to this age group. By carrying and spending cash, you have to go through more of an effort to get it out, make sure you have enough for your purchase, and stow the change. Hopefully, this will make you ask if this is a need or a want. I have heard back from this age group that when they spend a week only using cash, they get a better idea of just how much they are spending.
Make it harder to get to your credit card. I’m not talking about freezing your cards, just adding steps to actually get your card out. Wrap your credit card in a small piece of paper, tied with a rubber band. You now have to un-wrap the card to use it. This gives you a smidge more time to think about the need of that purchase.
Hold yourself accountable to someone about your spending. Make an agreement with someone you trust to discuss purchase over a certain amount. Simply discussing the purchase will force you to ask; “Is this a need or a want?” You will become a better consumer.