When it comes to money habits, there is definitely no shortage of poor ones. And if you’re like most people, you live on a fixed income. Meaning, what you bring in generally doesn’t fluctuate from month to month. Spending, however, might, so it’s important to have a good picture of what your typical spending habits are, so you can unlearn the bad ones and create good ones.
Track Your Spending…and use the data to hone your budget
There are all sorts of fancy money tracking and budgeting apps out there, ranging from simple personal to complex business. Here’s the good news, though, several of them are free! And free is good since we’re talking about saving money.
Whatever method you choose, it doesn’t have to be complicated, but it does need to track your income and some key spending areas like:
- Rent/mortgage
- Utilities, including cell phone and internet
- Groceries and eating out
- Gas and anticipated vehicle maintenance
- Insurance, such as health, auto, and renter’s/homeowner’s
- Child and pet care, if relevant
- Loans and credit cards
- Entertainment and monthly subscriptions
- Emergency fund and savings
When you first attempt to set up your budget, take note of fixed expenses and estimation in the other categories. At the end of the first month, you’ll have a pretty good idea of areas you need to improve or reduce spending.
Once you’ve tracked your expenses and identified the areas you want to cut back, go ahead and set limits on your non-fixed categories. Then, stick to your plan.
Get The Most Out Of Your Income…and save where you can
The trick to saving is knowing where you can cut corners and where you can’t.
What did you notice when you were tracking your spending? Did you severely underestimate how much your daily coffee trips cost? Or, did you realize that when you’re bored, you tend to make unnecessary purchases? Take note of these trends and then see if you can save money by doing some of these things
Pinch your pennies
You’ve heard the phrase “nickel and diming yourself” and it’s a habit that many people struggle to avoid. It’s critical to be mindful if you want to save money, though.
Essentially, there are a lot of things we’ve grown accustomed to as humans and many of the things we spend money on aren’t necessities, like that daily $8 pumpkin spice latte. So, if you find yourself buying those cute shoes even though you already have four pairs of black flats, or that new fishing lure because you don’t have one in that color; press, pause and think about how it impacts your bottom line.
Learn to pay with cash
Dedicate a certain amount of money for groceries, entertainment, and “extras” and then use cash. There’s science behind it but simply put, there’s something about using cash that causes us to spend less. Maybe it’s because if we only have a certain amount of it in our pocket, we can’t really go over our budget. Or maybe it’s because when you swipe a card for purchases, you don’t see the number in your bank account getting lower. If you have cash, you might think twice about buying the jumbo size popcorn and soda at the movie theatre.
Consolidate your debt
And then, avoid creating more.
One of your tracking categories on your budget should have been dedicated to loan and credit card payments. Your loan payments might be a fixed expense but chances are, your credit card payments are not.
Not only do they fluctuate, but you’re also wasting money you could be funneling into savings on interest payments. So, if you can’t afford to pay your card balances down to zero each month, you might consider taking out an unsecured debt consolidation loan. Such a loan will combine all of your debt in one monthly payment, cut down on interest, have fewer monthly payments, and establish a fixed payment amount. The money you save should then go into your emergency fund or savings account.
Take Advantage Of Autopay
This one is pretty straightforward.
In this day and age, you’d be hard-pressed to find a business that doesn’t allow you to pay your bills using autopay. This handy feature lets you set it and forget it! Setting up your payments to automatically deduct from your checking out can save time and money since there’s no need to mail a check or make a phone call. Just be sure you keep track of when payments are scheduled to come out so you have funds available (which you should because you’ve already made a budget).
The bottom line is that the better you know your spending habits, the better you can cut out unnecessary expenses and the more you can direct to your savings account. And let’s face it, having zero dollars in savings just isn’t a good habit.
