Why We Spend Unnecessarily and What to Do About It

Why People Spend More Than They Earn

First Published: ADawnJournal.com July 21, 2010

Remember “the number one personal finance tip of all time” I mentioned in Ten Timeless Personal Finance Tips By Financial Author A. Dawn article? That is, you need to spend less than you earn. To spend less, you need to know why we spend more than we earn. If you can grasp the basics of the “spending more than earn” scenario, it will be a lot easier for you to save money by spending less. Let’s look at the most important factors that cause us to spend more.

Lack of Information – The majority of the population have no idea where their money is going exactly. We often ignore small spending here and there; but at the end of the month all these tiny expenses add up and turn into something big and beyond our control. To handle this, you need to keep track of your spending. I don’t believe that dollar-for-dollar budgeting works. However, you need to keep track of your spending to see the patterns in your spending behaviour and take steps to cut down on unnecessary expenses. Here is an article to help you find personal finance software to track your spending: Personal Finance Software Review by Financial Author A. Dawn

Lifestyle Habit – Keeping up with the Jones, competing with colleagues, a tendency for showing off riches to the world, acting rich and successful but not able to survive without steady paycheques, feeling a sense of power while spending money, being jealous at other people’s stuff and trying to match their possessions, an inability to say NO to others when they ask for something (although you’re not in a position to afford it), not treating credit card spending like real money, not being true to yourself, and much much more – all these are variations of lifestyle habits. Let’s be honest here – If you aren’t able to save money because of one of these reasons or a similar one, it can be a serious problem and has to be dealt with seriously. I doubt that reading articles online will be any good resolving this. If you think you have this problem, I would suggest you read a few books, and based on the severity of your problem you may need to consult a qualified financial professional. Books I recommend:

The Simple Living Guide
Your Money or Your Life by Dominguez and Robin
The Millionaire Next Door by Thomas Stanley & William Danko

Instant Gratification – Here is an excerpt from my book Invest Now which is very suitable: “Every day, we face tempting opportunities to spend money. A sea of indulgences can distract you from investing for your future. “Buy now!” “Pay after one year!” “Don’t pay interest for six months!” Everyone everywhere is urging you to spend, spend, spend. I’ve even seen a “Vacation now, pay later!” advertisement on the subway. But every dollar you spend now is a dollar in lost investment opportunities that could have grown a lot more in the long run”. We are bombarded every second to buy into some “now and pay later” scheme. We want what we don’t need when we want it, and are willing to drag on paying interest to fulfill our instant gratification mentality year after year. What we don’t realise is that a $100 item is costing us $150 at the end of the interest paying term and it is prohibiting us from investing for our future – because we are paying interest on many other similar things and becoming money constrained. How should you handle instant gratification syndrome? Here are a few simple tips: try to pay for everything in cash; learn to delay major money sucking purchases, your urge will likely wither away if you can delay a few days; if you are at a store and can’t stop yourself from purchasing something you don’t need and/or is out of your budget, try counting 1 to 10, or take a few deep breaths, or try walking around the store. Once you try one of these; most likely your strong desire will go away.

Not Having Any Goals in Life – We tend to spend recklessly if there is nothing to look for in the future. Setting up goals for different stages in life is a smart way to save money and accomplish goals. These goals can be broken down into smaller parts. For example, instead of saving for a $20,000 down payment for a condo, it’s a lot easier to save $5000 each year for 4 years. Also, have set plans about your life such as buying a house by 30, paying half of the mortgage by 40, retiring at around 50, and so on. Each time you purchase something, think before paying for that item. Take a moment to think whether this purchase will help you achieve your goals or will take you away from your goals.

Whether your spending habit is causing you debt problems or keeping you from achieving your future goals, take a deep look at the causes and eliminate them to start saving for your life. No one else will care for your future and money like you do, and only you can take the necessary steps to secure your financial future.

Where To Go This Summer

Unites States, Canada, Morocco, or Tunisia?

It is getting towards that time, as the days grow longer and the temperatures rise, that people begin to think about taking a snap summer holiday. People who book in advance will of course have made their decision by now and be saving their spending money, but those of us who are never sure we will get the time off work will be working off a bit more of an instinctive reaction, to go somewhere that sounds good. Whatever your budget – and whatever your tastes – there are great summer holidays to be had even at such short notice.

It all depends on your starting point, to some extent. Naturally if you are starting in Canada, a summer holiday in the United States will not break the bank, but it might lack a little bit in terms of originality. Mexico is currently in the grip of something of a bio-hazard crisis and will probably be dealing with that throughout the summer, so the best tip is to head further south. Many people have spoken of the beauty of Andean Perú, and with good reason. It is a country that carries some of the most spectacular scenery in all of South America, and of course it is absolutely soaked in history. Macchu Picchu is one spot that has a worldwide reputation, but on the way there you will have the opportunity to see many others. The price for a basic hotel for one night averages out at close to thirty Canadian dollars.

If you are a bit more adventurous – or based on the other side of the Atlantic, then there are many delights to be had on the North Coast of Africa. Among them are Morocco – a real magnet for sun worshippers – and Tunisia. While these countries may suffer from the prevailing but deeply inaccurate reputation of being hotbeds of religious extremism, the reality is far from that. In actual fact both are highly modern, secular societies and are well equipped to serve the international traveler’s needs. Hotel rooms here are even more affordable than in Perú, and the scenery is pretty amazing in both countries. For the gastronome in you, the taste of the regional cuisine is something to experience time and again – whether you are a meat-eater or an avowed vegetarian.

Tunisia is the less expensive of the two – as Morocco has gained a reputation for being a real estate haven prices have climbed a little. But if you are feeling adventurous, splitting your holiday between the two could be the best idea of all. Both countries have plenty to offer, and it would be a shame to miss out on any of it – so by making Tunisia your base but planning a short hop to Morocco you can spend a little bit less while not depriving yourself of any of the fun. And yes, there are beaches galore in both countries, if you really cannot bear to do any more sight-seeing. It’s your loss, that’s all.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Travelnowsimply.com website (however, I will still hold the domain). I will gradually move all articles from this site to Entrepreneur Journey site. This article originally published on the above website on May 8, 2009.

Companion Flies to Hawaii only for $121 |Cheap Flight to Hawaii

Alaska Airlines MBNA World Elite MasterCard Annual Fee Goes Up

Alaska Airlines recently increased its World Elite MasterCard and Platinum Plus MasterCard annual fees to $75 and $99. However, these cards still provide a lot more value than their annual fees.

These cards come with a bonus 20,000 and 30,000 Mileage Plan miles after spending $1,000 within the first three months. 30,000 miles are good enough to fly one-way business class (for example, Vancouver to New York) short distance or one-way economy class long distance (for example, Toronto to Iceland) on Alaska Airlines partner members.

And then Alaska Airlines MBNA World Elite and Platinum Plus MasterCard let your companion fly for $121 US only when you pay full fare for yourself.

You can fly anywhere Alaska Airlines flies and one popular destination is Hawaii, which could cost around $1000 to $1200 for your companion. The only drawback is that companion fare can be used only on Alaska Airlines and they serve only Western Canadian cities such as Calgary, Edmonton, Kelowna, Vancouver, and Victoria.

Fly Companion to Hawaii for $121 | Alaska Airlines

Companion fare can easily pay off the cost of the annual fees for these cards: $75 and $99 for Alaska Airlines Platinum Plus & World Elite Mastercard every year.

In the first year, you will have to meet the minimum $1000 spent requirement within the first three months and then the companion fare will be awarded to the primary account holder’s Mileage Plan account after two billing cycles.

Starting the 2nd year, companion fare will be awarded after the anniversary date + within 2 billing cycles.

The anniversary date is not the date when you opened your account, but when you opened the account + an additional 6 to 8 weeks.

As you can see, these two Alaska Airlines cards still provide value if you use them tactically.

Self Help Books; Are They For You?

How To Pick Self-Help Books

A thriving industry has grown up around the practice of writing self-help books. It is not actually a new thing, either, when you think back you can all probably name a few yourself. They may be about weight loss, they may be about finding (and keeping) your perfect partner. Some are about understanding the special people in your life that bit better. What they all have in common is that they address a need within a person – a need that that person has identified and considers an immediate concern. This can be just about anything – if you have lain awake at night, or spent idle moments in the day thinking about something that makes you anxious, the chances are that it has been written about somewhere by an author looking to address the problem.

What makes a self-help book is its outlook. Generally, you will find that they speak in bracing, positive terms directly to you as an individual. This differentiates a self-help book from a more scientific textbook that may address the specific problem in dry language and enumerate possible solutions to it. A self-help book will generally favour one specific approach, and concern itself with getting you to follow that approach. There is a tendency for self-help books to be written by someone who has faced the problem themselves and wants to share how they overcame it. This fact alone will be a good way of deciding whether the self-help book is for you.

Many people feel that self-help books take a simplistic, cajoling approach that offers only platitudes and a set, unchanging solution to a problem that may be a lot more complicated. As individual human beings, we have all learned over time that something that works for a friend may not be quite as beneficial for us. The same is true about plans of action for specific problems. Though you may see on the surface that your problem is similar to that of someone else, a solution that works for them might not help you – indeed it may even exacerbate your problem.

All of the above gives the impression that self-help books are of no value, but this would be misleading. Several self-help books have had results that have been proven over time. As a rule of thumb, a book that has been around for a while will have some words of wisdom in it that never go out of date and are as true for one person as they are for the next. Using a self-help book like this is certainly unlikely to do you any harm, particularly if it comes with the blessing of someone who knows you well and is aware of your needs. However, the most important thing is to always be aware that the book will not make things great all on its own. It may give you some handy advice, but it is up to you to put that advice to work for you. As was always the case, matching words with action is the key.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Simplepersonaldevelopment.com website (however, I will still hold the domain). I will gradually move all articles from this site to Ahmed Dawn Dot Com site. This article originally published on the above website on Feb 28, 2009.

Why You Should Avoid American Express Use Points for Purchases

How Amex Wants You to Lose Big Time

First Published: ADawnJournal.com Published Date : September 27, 2016

American Express Canada recently launched a new option, letting card members fall for instant gratification by letting them redeem daily purchases for small amounts. According to Amex, this option will provide ultimate flexibility and make daily life seamless. However, what Amex is not saying is that clients lose big time when they redeem points for daily purchases instead of converting to miles.

American Express points provide the best bang for your buck when you transfer them to airline miles, such as with Aeroplan or Avios. The transfer rate is 1:1, meaning you will receive 1 airline mile for each point. Now, if you are knowledgeable about airline rewards programs you should be easily able to extract 5 to 6 percent return per dollar flying business or first class. Sometimes the return can be astronomically high like 30 percent flying business or first class on airline miles. If you fly economy class using miles, your extraction rate will be a poor 1 to 2 percent.

So what’s the rate you are getting from American Express if you redeem points for purchases? Not even 1 percent. On the Amex Gold Card, the redemption rate is $7 for redeeming 1000 points. What this means is you get $0.007 per point, which is even less than 1 cent per point, making it a 0.7 percent return – not even 1 percent return. If you use Amex TripFlex option to redeem points for travel, you will get a 1 percent return or 1000 points for $10.

The best value Amex rewards points generate is when you redeem them to convert into miles. Of course you need to know how airline miles work and if you don’t want to follow that path, you should not have this card in the first place. There are other credit cards that offer higher return for redeeming points for groceries and other purchases. There is no point in having American Express credit cards, paying hefty annual fees and redeeming points at such a horribly low rate. Also don’t forget that although American Express is charging a hefty $150 on its popular card Amex Gold Rewards, it’s not providing many common benefits that another premium card would provide for a $120 annual fee such as Trip Cancellation Insurance, Concierge Service, etc.