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Reasonable Consumption: How to Spend Money Wisely

How to Spend Money Wisely

How to Spend Money Wisely. This is a science about how people spend money, what makes them save or give huge amounts of money

We figure out what expenses can be reduced without turning into painful stingy.

Most often, reasonable consumption is associated with ecology and a humane attitude to the environment: do not waste water and electricity, do not buy plastic bags, sort garbage. But reasonable consumption is a careful attitude to any resources, including finance.

Reasonable consumption is one of the main modern trends. In 2017, Richard Thaler, an American, received the Nobel Prize in economics for research in behavioral economics.

Reasonable Consumption: How to Spend Money Wisely

#How to Spend Money Wisely. This is a science about how people spend money, what makes them save or give huge amounts of money, why someone is stronger and someone is weaker than marketing tricks. Behavioral economics help people learn to spend money more consciously and wisely.

The central banks of many countries also began to protect people from the marketing tricks of financial organizations and unnecessary expenses. The Bank of Russia, for example, is initiating laws that will help people better monitor their spending.

For example, in the near future, banks will have to tell the client both the remaining limit and the total amount of debt during each credit card transaction, so that people keep track not only of how much they can spend, but also how much they owe to the bank. The main thing is that the economy is reasonable and does not turn into unhealthy stinginess. So, what can one save on without compromising the quality of life?

1. Impulsive shopping

How to Spend Money Wisely: The main enemy of rational consumption. We make most purchases spontaneously: I liked something right here and now or attracted a discounted price. If you control yourself, then you can protect yourself from such expenses.

– Use the “defer” option. Choose in a store, touch, try on and go home or to work for a few hours or a day. After some time, it will become clear whether such a purchase is really needed or not.

– Make lists. This helps to buy as much as necessary , and, for example, not to throw away spoiled products.

You can also save every day on trifles – for example, do not buy plastic bags in stores, but carry a rag bag with you. Or pour water with you into a bottle once bought and not spend 30-60 rubles a day on it.

There is a theory that a person does not need more than 100 things. American Dave Bruno lived a year with only 100 personal belongings. The main idea of ​​his 100 Things Challenge methodology is not to let yourself start more than a hundred things, but to sell, distribute or throw out the rest. Perhaps 100 things are an unnecessarily tight restriction, the point is rather to revise your financial behavior and stop spending money on what you don’t need, do not save too much.

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2. Everyday spending

#How to Spend Money Wisely. On average, Russians spend about 30% of their income on food per month — marketers and merchandisers have been particularly successful with gimmicks in this area. They literally force visitors to stores and sites to buy more. It is important to remember their tricks in order to confront them.

– Carefully read the price tags. #How to Spend Money Wisely. Red labels near prices make buyers think that these are discounts, although this is not always the case. Sometimes on the price tags in large numbers they write the price with a wholesale discount, excluding VAT, and in small ones – the real retail value.

– Look at the lower and upper shelves. The product, the sale of which is most beneficial for the supermarket, is located in the “golden zone” – approximately at the level of the adult’s chest, at a height of about one and a half meters. Here, this product is best seen and convenient to take. Most likely, on other shelves you will find goods of not the worst quality, but at a lower price.#How to Spend Money Wisely.

– Put in the basket only what you need. Departments with milk, bread and meat in large stores are located at different ends of the premises so that customers move around the hall and take something along the way that they did not even plan to buy.

– Check the weight or volume of the product. Often cereals and sugar are packaged in 900 g instead of 1 kg, chocolate – 90 g instead of 100 g, vegetable oil – 930 ml instead of 1 liter. Lower prices do not always mean savings. For a similar product, the price may be slightly higher, but also the mass is greater.

– Compare prices. Discount cards for specific stores with cumulative discounts seem to bode well. But perhaps in the supermarket where you received the card and accumulate discount points, goods are much more expensive than in other stores, even taking into account the discount.

– Soberly and critically evaluate marketing campaigns. Bonuses for purchases, which can then be exchanged at a surcharge for a product, or “every eighth purchase as a gift” is just a way to make you chase gifts (sometimes completely useless) to buy more than you need.

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3. Transport

A working person cannot refuse transportation costs – at least you need to get to work and back. But in the modern world, owning a car is not always the most economical option.

#How to Spend Money Wisely. – For large cities with traffic jams and decent distances, a reasonable alternative to your own car is public transport. Subscriptions and special cards cover several types of transport and rarely cost more than 2000 rubles per month.

– If you do not need a car every day, then it is likely that a taxi will be a better option. Gasoline, maintenance, taxes, insurance, parking and car wash can cost you a considerable amount. In maps and geo services applications, you can compare the prices of different taxi operators and decide whether or not to get your own car.

#How to Spend Money Wisely. – There is another economical alternative to a personal car. If you need it only occasionally, for example, to travel out of town or travel to a distant store, then you can use car sharing services. They allow you to take the car for the time you need and leave it in convenient places. True, in Russia such an opportunity so far exists only in large cities.#How to Spend Money Wisely.

If you can not do without your car, it makes sense to buy one that meets your income. It is wise to spend no more than annual earnings on a car, but less is better. The amount of 6-12 salaries with proper accumulation will not take large loans and quickly restore the budget after a big waste.

4. Housing

How to Spend Money Wisely: Renting an apartment, especially in large cities, can be more profitable than taking a mortgage. For example, a family rents housing in the center of St. Petersburg for 30 thousand rubles: convenient location, a school and a kindergarten nearby, parents go to work on foot. A similar apartment costs at least 6 million rubles in the same area, and it will most likely be worse than their rented one.

If the family takes a mortgage for 25 years, then the payment will be about 50 thousand per month. And you also need somewhere to take the down payment – a million.

#How to Spend Money Wisely. Suppose they continue to rent the same apartment for 30 thousand, and 20 thousand (the difference between rent and mortgage per month) will be postponed for a deposit with capitalization of interest or use other financial instruments.

Then after 25 years, even taking into account inflation and rising housing prices, the size of the deposit will exceed the value of their apartment. Of course, this speculative scenario does not provide for many unexpected things – for example, if real estate prices soar, then an apartment will be a better investment. Or vice versa.

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#How to Spend Money Wisely. If the bank does not approve our heroes a mortgage for such an amount, they can buy an apartment in the Leningrad Region for 4 million rubles – then the payment will turn out just about 30 thousand a month. But travel costs will increase significantly, you will have to change the school and kindergarten, you may need a car. Time that previously could be spent with the family will have to be spent in traffic jams. All this affects the quality of life. And there is something to think about when choosing between renting and buying.

#How to Spend Money Wisely. However, for many people, an apartment in the property is not just walls, it is psychological comfort, the confidence that you have a home and will bequeath to children. Registration at the place of residence provides additional opportunities.

Plus, some fixing of expenses for an apartment for 25 years in advance, because payments on a mortgage cannot change (unless, of course, you have chosen differentiated payments – read more about this in the text “Mortgage loan” ). In addition, people are sometimes willing to overpay for a guarantee of stability, even to the detriment of comfort.

#How to Spend Money Wisely. For others, mobility and the availability of infrastructure are more important, and it does not matter that the apartment does not belong to them, it is important that it is comfortable to live in it. In addition, in case of financial problems with a rented apartment, you can simply move out, but with a mortgage everything is much more complicated, you can even lose it.

5. Loans

#How to Spend Money Wisely.  Credit is a convenient and popular financial instrument. Over the past three years, the number of Russians who took out loans has grown from 58 to 67% , but you need to use this opportunity carefully and not take on impossible obligations.

Especially if you need a loan to buy the latest model of an expensive phone or other items that are far from essential when there is hardly enough money for buckwheat. Remember that the level of credit load per person should not exceed 30% of  monthly income .

Otherwise, there is a risk of not managing payments and falling into a  debt hole . A balanced approach to credit is another important marker of reasonable consumption. #How to Spend Money Wisely.

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