You might think that excessive personal spending is easy to recognize when you see someone buying goods and services with what appears to be a widespread appetite. This observation may be true, but there is a risk of passing judgment, and perhaps not knowing enough about the person being observed. A better approach is to evaluate individual spending in the context of meeting a desired goal and then decide whether the spending pattern can support the resource requirement to meet the desired goal. The following is a basic plan that can help you determine excessive personal spending.
1. Set a future context by visualizing your desired position three to five years from now. To stay focused and motivated, it is best to establish a long term position before the short term.
2. Write this visualization in a statement called a “vision statement” and include an anticipated emotional response as you journey toward fulfillment.
3. Write an achievement goal that is needed to make your vision a reality in each of the following areas: Social – such as marriage, or children or a major vacation or travel to at least three continents; Academic – to obtain an advanced degree or certificate or career change; Financial – doubling household income or starting a business or setting up a fund for your children’s education; and personal health – actively engaged in the practice of “good” health habits
4. Project the dollar amount needed to achieve your goals and make your vision a reality within three to five years
5. Determine your current spending pattern/month to see if you will have the resources or will need to make adjustments to realize your vision in three to five years
This step-by-step method allows for a self-assessment to determine your spending patterns and provides you with data to decide if you are spending excessively.