July 2013

Simple Ways to Get Your Spending Under Control

Do you ever wonder where your money goes each month? How do you know if you're spending too much? If you constantly run out of cash before your next payday rolls around, it's a pretty safe bet that you are overspending. So unless you plan to get a second job and generate more income (most people take home about 65 cents for every dollar earned), the smartest way to have more money is to stop the money leaks. In other words, you have to control your spending.

If you are truly in the dark about your finances (translation: have no budget) then it might seem like an overwhelming task to try and change your spending habits. But until you seriously take control of your finances, you will continue to fall short every month. This situation generally leads to taking on more new debt in the form of credit card charges which allow you to get by until payday. Months (or years) of this practice can result in massive credit card debt, a lower credit score, and overall financial instability.

Here are some simple ways to begin cutting your spending. If you are just starting out, pick a few suggestions that you think will work for you and begin with those. You can always add more as you become more familiar with your own personal financial situation. Be persistent but flexible. If one tip doesn't seem to work, try another one.

Tips to Cut Your Spending

  • Track your expenses. It's impossible to see where the money leaks are if you have no idea how much you're spending or for what. For one month, keep all your receipts. This will show you the actual amount you spent and literally what you bought. How many of these items would you consider "necessities"? Separate your "wants" from your "needs". "Wants" is where you can begin to make cuts.
  • Give yourself a weekly cash allowance. Who said allowances are just for kids? Determine a reasonable amount ($30, $50 or whatever) and carry that amount of cash on you for "extras". This might be visits to the coffee shop each morning, dry cleaning, lunches with co-workers, etc. Once the money is gone, it's gone. No cash advances allowed. Most people find it harder to part with cash... just swiping your credit or debit card makes it too easy to overspend.
  • Make small changes. If you are in the habit of going out to lunch every day it's probably unrealistic to think you can start bringing your lunch from home five days a week. Take financial baby steps. Try brown-bagging one or two days a week. That could easily add up to $40-$80 a month in savings. Do you enjoy $5 cappuccinos every morning? That's $100 a month! Splurge on one a week and bring your own coffee on the other days. That's more savings for you. Sometimes it's literally the little things that add up to big expenditures.
  • Eat more meals at home. Yes, eating at home requires some forethought and meal-planning. But if you frequently dine out in restaurants, this is a great way to save. Plus when you cook at home you can control the portions and the quality- two things that are nearly impossible to do when you eat out.
  • Make a grocery list and stick to it. After housing and transportation costs, food is usually the next biggest item in most people's budgets. This is where meal planning really pays off! Take the time to prepare a weekly menu plan. Go through your pantry and figure out what you already have and what you need. Doing this hopefully lets you avoid ending up with 10 cans of tomato sauce and four jars of peanut butter. Always eat something before you shop. Being rushed and hungry is a dangerous combination in the grocery store!
  • Put away the credit cards. Try living on a "cash-only" basis. Studies show that people are much more cautious about spending cash than when using a credit card. Determine an appropriate amount whether you're going to the gas station or the grocery store. Keep a running total of your items so you know how much you have in your cart. The idea behind this is to make you acutely aware of what you are spending. Some items which you might normally just throw into your shopping cart may not fit into your weekly cash allotment. Always remember "wants" vs. "needs".
  • Set specific goals. Saving money is always a good thing but having specific financial goals is a great way to stay motivated! Maybe you want to pay off your debt. Or you need to start funding an emergency savings account. Perhaps you want to travel to exotic locales. Whatever the reason (and there may be more than one), finding your spending leaks and successfully plugging them can give you the extra savings needed to reach your goals.