So, you want to be a millionaire? Conventional wisdom dictates that to save money, you need to squirrel away as much as possible while drastically reducing your spending, period. While there is some merit to that strategy, the smarter way to grow your wealth is to cultivate careful spending habits that will allow you to maximize your savings without cramping your style.
Here are four smart spending habits to help you save your first million pesos.
1. Categorize your expenses and monitor your spending.
One easy way to keep your finger on the pulse of your spending habits is to break down your expenses into categories. Garrett Gunderson, CEO of WealthFactory.com suggests a framework consisting of four expense categories: destructive, productive, protective, and lifestyle.
By categorizing your expenses, you can easily see how to cut destructive expenses, splurge on productive and protective expenses, and spend conservatively on lifestyle expenses. If you make the right choices in setting limits on your spending, your productive expenses will pay for themselves and then some. Make sure to monitor your spending carefully and, soon, good habits (and savings!) will emerge.
2. Avoid emotional spending.
Kevin O'Leary of ABC's Shark Tank and O'Leary Financial group urges, "Don't go shopping to change your mood. It might make you feel better in the short term, but I promise: the long-term fulfillment of saving and growing your money far outweighs the temporary satisfaction of retail therapy."
Instead, try to regulate your emotions by talking with friends and family, exercising, watching a documentary, or reading. Or, for a more harm-reductionist approach, try planning small, regular outings for yourself using your lifestyle expense budget. For example, plan to get a fancy massage at the spa or indulge in a lavish meal once a month instead of every time you feel stressed. Developing good coping strategies will eliminate bad spending habits and help you save money quickly.
Related: How successful people stay calm
3. Choose and pay off your loans strategically.
Loans can be terrifying. Before becoming anxious about how to pay off your personal or business loans once you get them, take the time to research the different types of loans out there.
If you are already in the throes of debt, Diana Ransom from The Wall Street Journal's Smart Money magazine proposes prioritizing debt repayment for the loan with the highest interest rate first and then consider consolidating your loans into one longer-term package. Paying off one larger loan will allow you to avoid wasting money on costs accrued on many smaller loans.
4. Invest wisely.
Neil McCarthy, a research chemist, made his first million solely by investing in the stock market in the 1990s. Paul Glandorf, a pipe fitter and construction worker, took investing seriously as a retiree and is now sitting on a huge pile of money. The lesson here is clear: know how the stock market works.
After you do your homework and have a good grasp of the stock market, start monitoring stocks for yourself and experiment with making investments.
Once you get a hang of trading, sales expert Grant Cardone advocates diversifying carefully and committing fully to your causes. In an interview with Entrepreneur, he said, "You want to find one or two spaces you completely understand, that can't be destroyed, and go all in. That's how people get rich. People don't get rich by tip-toeing in with $100 investments all over the place." By spending wisely in the stock market, you can strategically multiply your initial investments and be well on your way to becoming a millionaire.
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This article originally appeared on Entrepreneur.com. Minor edits have been done by the Entrepreneur.com.ph editor.