Canadians on average spend $96.40 of every $100 we earn, according to Statistics Canada. Bills and cost of living expenses eat up large chunks of that money for many people. Then there's our debt and the cost of repaying it. Canadians owe $176 for every $100 of disposable (after tax) income.

"If you cut out some bad spending habits and put a spending plan together, the good news is you can still pay the bills and maintain a lifestyle you want," says Paul Chia, CFP, Financial Advisor, Coastal Community Credit Union. When you know how, when, and where you spend your money, even just small tweaks have the potential to transform your finances.  

Why good spending habits matter

Uncontrolled spending means grabbing that extra item at the checkout that's not on your list. Or ordering takeout when your fridge is full. Or impulse-buying that new ski jacket online—in the middle of summer. It can also mean the habitual spending that adds up over time, like the daily coffee at your favourite spot.

Some small changes to your habits can help you keep your spending in check. The first step is to know what bad spending habits look like.

"It should be possible to track and control your spending, and still enjoy treats, have meals out, and buy things you want."

— Paul Chia, CFP, Financial Advisor, Coastal Community Credit Union

6 bad spending habits to be aware of

The following bad spending habits can all contribute to eating up much more of your income than you might think.

1. Daily cup of coffee
   A cup of coffee, often with a snack, has become a routine rather than a treat for many people. That daily caffeine fix adds up over time.
2. Eating out too much
   Buying lunch and dinner out or getting takeout is much easier than making homemade meals, especially with so many great eating-out options on the Island. However, all these meals out can put a significant dent in your finances, not to mention leading to food—and money—waste at home. 
3. Late credit card payments
   Late credit card payments often incur a fee. It may not seem like much, but it's money that could be better used elsewhere—especially if it becomes a habit.
4. Buying brand name groceries
   Brands spend millions to convince people that only something with their logo on it will do. When it comes to your weekly food shop, there's really no difference between the big brand and the store brand—apart from the price.
5. Impulse buying online
   The ease of online shopping makes it hard to resist. Online retailers know exactly which buttons to push to persuade people to click "Buy Now." 
6. Throwing money away
   You may not think you're throwing money away, but do you know for sure? What about that gym membership? Or that on-demand TV subscription? Or the mobile phone plan you thought you needed? It's amazing what you could be spending on things you don't need, use, or even want anymore. 
   Taken individually, for a typical Vancouver Island household the above habits might add up to just a few dollars a day each month. Taken together over time, that can really add up. If you overspend by $200 every paycheque cycle for two years, that’s almost $10,000.

7 ways to spend smarter

"It should be possible to track and control your spending, and still enjoy treats, have meals out, and buy things you want," says Paul.

1. Know where your money goes 
   Look back over your spending and categorize where your money has gone, for example on gas, home repairs, and eating out. You can see it all in your online banking.
   "Sit down and go through your spending with a fine-tooth comb to build a picture of exactly where your money goes," recommends Paul. "One way to make this easier is by downloading all your categorized chequing account and credit card transactions into a spreadsheet."
2. Create a budget
   Once you know how you spend, you can plan to spend more wisely. A simple budget can help you keep your spending in check and focus on priorities, such as saving or paying down debt. Your budget should be part of an overall financial plan, that includes your financial goals and how you can achieve them.
3. Identify quick wins
   Look for easy places to reduce spending. This includes cancelling subscriptions you don't use, making credit card payments on time to avoid late fees, and reducing your daily coffee and other treats to every two days. 
4. Set up multiple accounts
   Consider having a chequing account exclusively for your regular outgoings, such as subscriptions, fees, and bills. That way you know these are all covered and you can track them in one place. Set up another account, with no overdraft, as a "spending" account. Transfer a specific amount each month into this account for non-essential spending.  
5. Remember to save
   It's important to also think about your longer-term financial goals. Separate savings accounts can help you "pay yourself first" each month to save for financial goals.
6. Set up recurring payments
   Set up recurring payments to your chequing and savings accounts. Also, set up regular payments to your credit card or line of credit to chip away at your debt and avoid those late fees.
7. Limit credit card use
   Focusing on reducing your debt is one of the best ways to improve your finances. Set smaller limits for your credit card so it's harder to make those impulse purchases online. While it can take a little time to change your spending habits, you'll be glad you made the effort when you see how quickly it can help you reduce debt and save more.

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