We dream about having nice things, big cars, nice homes, latest gadgets, fancy cloths. The moment we start working after graduating from university, we start accumulating the things we dreamt as a kid or student. Thanks to the media around us – be it print media, social media, electronic media, TV channels blaring advertisements 24X7. They make us convinced that if we do not owe the latest, we are not human in sync with the world. The tone of modern day advertisements is that we are inferior if we do not have the latest gadget, latest fashion.

Once the income starts coming in Post University, we welcome all the stuff, toys to keep us happy. We submit ourselves to frequent outings with friends and relatives and many more things which we could not do being a student. Owing the stuff and frequenting restaurants is considered as a new COOL. Suddenly we feel urge to buy new automobile because all our peers have one. We want to outshine our peers hence we want the best automobile, fully loaded with all amenities – just to show off and in our heart we feel “we deserve it”. We look to get hold of the well deserved large house in the toniest neighborhood which we were eying from long. Consumer credit is readily available. This gives us a good excuse to buy the latest 80 inch 3D LED. Obviously we need these gadgets to flaunt ourselves in our circle. Also this reflects in the society that I am cool and doing well in my professional life.

We try to do everything except saving & investing money. It’s always good to pretend that we do not have sufficient income to start investing now and we will have much better success with investments when we have higher income than what we are earning now. A big chunk of our earning is dedicated to the monthly payments that are going out for the nice house, a big car, 80 inch 3D LED and many more gadgets which we have accumulated – just to show off that we are doing well.

This tendency to spend salary as and when it comes makes us struggle financially month on month. Every month we have a list of TO BUY and the list never gets trimmed. One item leaves the list, another item occupies the place. So what can we do if we are making 6 figure incomes and still struggling to pay for necessities to survive day to day life? We must put a cap on non – essential spending. Cut it down so that we have precious cash saved for essential spending and investing. It will hurt for a month or two, but we will not die if we do not have latest iphone 7 in our kitty or if we do not have the latest Honda or Toyota parked in our garage.

Unless we stop spending recklessly, we will not come to know what is essential and what is non essential spending.

A simple plan: How can we check overspending

1. Make a list of monthly expenses without which we cannot live like Home loan EMI (mortgage), electricity bill, maintenance charges, telephone bill, and internet bill. Mark them as NEED

2. In another list, keep all expenses which are our WANTS, like eating out, buying latest phones, new cloths, and outings during weekends etc.

Now once the list is made, strictly write every penny that you spend under respective list. Over a month or two you will get a very clear picture that what you are spending on essential items and what is being spent on non-essential. Cut down on non essential, put brakes and see the magic. In a couple of months you will have a very positive cash flow and loads of money freed up for investing.

This is basic money management, not a rocket science. We need not to be an expert in finance to make money work for us.

Overspending has to be tackled at the earliest if you are not having a positive cash flow month on month. Overspending can ruin your retirement plans and can even upset your life’s balance sheet. If you wish to retire early to pursue your passion, if you are looking for financial independence, if you want to generate passive income so that you do not have to depend on your day job – you must sit down and do the basic exercise to assess your expenses and come harsh on overspending.

Believe me; cutting down overspending can work miracles on your cash flow. You can free up a lot of money which can be invested judiciously to generate good returns over a period of time.