Get Control over Spending Habits

Bad habits are just as easily formed as good ones. Once ingrained, they're even more difficult to break. And some bad habits, like living beyond your economic means, carrying excessive debt, and engaging in inappropriately high-risk investing, can have a devastating impact on your life and livelihood.

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According to an article in , the newsletter of the American Medical Association, many beliefs and subsequent bad habits surrounding finances are formed between the ages of 5 and 12. That means that well before a physician has begun to practice medicine, those poor financial habits may be entrenched within their financial psyche. Experts believe that a better understanding of those habits and your financial makeup is the key to improving your financial situation.

KNOW YOURSELF

It has often been said that we shouldn't sweat the small stuff. In many respects, that's good advice. But when it comes to finances, the small stuff can often add up to great sums.

For example, if your daily routine calls for spending $2 for a latte on the way to work, $1 at the soda machine, and $2.50 for an afternoon snack, that may not seem like much money taken 1 day at a time. Over the course of a year, however, that spending habit will total $1430. Invested for 20 years at 10% interest, those daily droppings would grow to more than $80,000.

With that in mind, it's advisable to take a close look at some of your spending habits, eliminating or significantly reducing them along the way. We all like to treat ourselves, but if a meal at an extravagant restaurant is equivalent to a half-day's pay or more, you might want to consider dining on less expensive cuisine. And if you're the sort of person who can't seem to resist an impulse purchase, make an inventory of all the items in your attic, basement, or garage that rarely get used. Seeing the list of items mount up might help you think twice the next time the purchasing impulse strikes.

Of course, we don't often see ourselves as others do. Detecting compulsive or just plain poor spending habits might not be that easy. Debtor's Anonymous, a group dedicated to helping individuals curb their spending habits, suggests you start by asking yourself some of the following questions:

• Are debts making your home life unhappy?
• Ever make unrealistic promises to creditors?
• Have you ever developed a strict regimen for paying off your debts, only to break it?

If you find yourself answering "yes"to many of these questions, you could be a compulsive spender. Debtor's Anonymous (781-453-2743; www.debtorsanonymous.org) might be able to help.

UNDERSTAND WHY

AMNews

According to the article, advocates of the emerging field of financial psychology say it's particularly important for doctors to understand why they make the financial decisions they do for several reasons. Managed care has gradually taken a bite out of physicians'income and autonomy, yet the costs of a medical education, starting a practice, and malpractice insurance have risen dramatically. The temptation to borrow to get your head above water is understandable, but it's not necessarily the right road to take.

Financial psychologists can help. They're trained to help individuals focus on both their conscious and subconscious feelings about money, as well as analyze financial behavior such as poor spending or investment decisions. Many of these feelings, experts say, stem from early childhood experiences and parental example. They're deeply rooted, but they can slowly chip away at an individual's financial and emotional well-being.

Hourly rates for financial psychologists range from $150 to $180. However, this is a relatively new field, and finding an experienced, reliable financial psychologist might not be easy. Your best bet might be to talk with a financial planner who may be more familiar with professionals in this field. It might cost you $180 an hour, but it will be money well spent.