I recently had a heart-warming conversation with a reader who lives in the inner-city community of Trench Town, in Kingston Jamaica. I met Nicolini Williams two years ago when he participated in a financial literacy training I was offering to members of the Miracle Club, the youth mentorship arm of the Agency for Inner-city Renewal based in that area.

Now a first-year law student, this brilliant young man shared with me how much he had gained from learning the principles of money success. Williams explained that he had not grown up in a home where financial management was taught or even mentioned, and consequently, he often squandered money on unnecessary items.

After being exposed to new concepts about smart financial habits, Williams was able to identify his negative attitudes and actions regarding money. He realised that if he continued to seek more information about success principles and applied what he had learned, he could eventually break free from his financial problems.

According to Williams, one of the strategies that has helped him to transition from “financially ignorant to financially competent” is a process of questioning himself before making any purchase. He pointed out that when he asks these questions, it prevents him from making unwise spending decisions that could jeopardise his financial future.

I think that Williams’ questions are worth sharing, as they will allow you to consider what’s really important before you spend.

Am I buying this item because I need it or want it?

There are very few things in life that could truly be classified as necessities — water, food, clothing and transportation come readily to mind. Add a few indispensable utility bills and your needs list will be very basic.

While life would be boring if you only bought the bare necessities, you don’t have unlimited income to purchase everything your heart desires. Using a budget can help you to prioritise your spending to select those things you need for survival, before you treat yourself to the things you want.

Will I regret buying this item later?

Many people are guided by their emotions when shopping, which often leads them to make impulsive purchasing decisions. How many times have you bought something on the spur of the moment because it looked pretty or because the salesperson had a convincing pitch?

Think hard, are you really going to wear a dress that doesn’t suit your figure, even if it is the latest rage? Are you really going to find the time to install the complicated shelving system in your closet? Resist the urge to splurge if you think you’ll probably regret your choices later.

Can I get this same item at a cheaper price?

Most people would hate to think that they bought something for a price that was higher than what was available elsewhere. By asking yourself this question, you are utilising an important weapon in the war against overspending — doubt.

Once you start wondering if there could possibly be a bargain waiting for you at another store, you’ll probably walk away without making a purchase. Unless you really have a genuine need for the item, it is highly unlikely that you will continue looking for it elsewhere.

Will my financial situation change after I buy this item?

It is easy for most persons to think about the immediate pleasure that they will receive from purchasing an item. However, do you usually contemplate the longer-term repercussions of your spending decisions?

Sometimes, the total price you pay for something can be more than just the cost of the item. For example, if you buy a new television on hire purchase, the loan interest expense should be factored in; if you purchase a car, include the cost of insuring, servicing and licensing it as well.

Is there a better use for my money instead of buying this item?

Some lucky persons will have enough disposable income to spend freely without financial distress. Although you may be able to comfortably afford an item, it doesn’t mean that you should get it without considering the opportunity cost of your purchase.

Asking this simple question will help you to focus on your priorities, as it reminds you that there is more to life than acquiring another pair of shoes. This can prevent you from spending money that should be directed to more important goals such as buying a home or saving for retirement.

I need this item, but don’t have enough money to buy it; how can I afford it?

While many people will buy frivolous items on a whim, they will often forego spending on really important things because they don’t have enough money. Sometimes you have to stretch yourself financially if you want to get ahead.

If you have insufficient funds, this question can help you to think of creative ways to get what you want instead of just giving up. You may conceive of practical ideas to earn extra money, or enlist the assistance of other persons to help you to achieve your objectives.

Copyright © 2011 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, October 27, 2011

Read an article about the work of the Agency for Inner-city Renewal:

Mission H.O.P.E. – Righting the Wrong Address

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmartonline.com. Contact Cherryl