Tips to Better Manage Your Spending
Most people say they donÔŅĹt have the discipline to budget and save their money, but it can be a lot easier than you think. Whatever the state of your financial life, developing a sensible budget will allow you to better manage your spending. And that is a great feeling.
Your Cash Flow
The key to successful budgeting is knowing your monthly spending needs and habits. Creating a budget means tracking your personal cash flow -- how much money comes in and how much goes out. Adding up your monthly income is easy, but tallying up all your spending takes a little more effort.
First, collect all your bills, your credit card statements, your checkbook register, and receipts for your groceries, gas or anything else you buy with cash. Track your expenses by making entries in a notebook, or use a money management program such as Quicken or Microsoft Money. Those programs make budgeting easy. They really are worth the investment and often can be found discounted at computer retailers or bookstores.
Divide your spending into fixed costs -- such as mortgage payments, rent or loan payments and variable spending, which includes categories such as clothing, food and entertainment. Although you may be able to reduce your fixed costs by, say, refinancing your mortgage to get a lower interest rate, in most cases it is much easier to trim your variable spending.
Setting Goals
Once you have a handle on your spending, you can easily determine which costs you can cut and which you cannot. Often, as soon as you see how much you are spending on your morning cappuccino and doughnut, you will be motivated to cut back. Keep motivated by setting goals. Your goal should be to save at least 10 percent of your pay each month. But start by doing what you can and gradually bump it up.
Your Reward!
Finally, keep a goal in mind of why you are living on a budget. Promise yourself a modest reward for your efforts. Make it something you love and don't often get to do. Blocking out some personal time for an activity you enjoy or just to relax is a great, inexpensive way to reward yourself for all the hard work.
Helpful Tips
Lastly, here are some helpful savings tips that can get you started on the road to better managing and saving your money.
- Gather three months of bills or, if possible, all of the past year's bills, and add up how much you spend every month. Add up your spending in categories such as housing, entertainment and food. Take a hard look at what you can spare. Entertainment expenses are easy to slash, but utility bills are not so easy to cut. Keeping a daily journal of what you spend each day may sound obsessive, but it can be eye opening. Once you know where your money goes, you can spot your mindless excesses.
- Save $ on lunch. It is really not very hard to bring your lunch from home. Buy food that you can keep at work. Soups, frozen meals, snacks, etc . . . you can save $40-60 dollars a week!
- Stay away from ATM machines that charge fees. Even better, plan to withdraw a set amount each month and stick to it.
- Get a credit card with no annual fee and a low interest rate.
- Pay bills as soon as they come in. Avoid wrecking your budget with late fees. Decide what you can cut, and then do it. Track what you are saving, and you will be pleased. Budgeting is a bit like dieting; it takes discipline, but once you get in the habit -- and see your positive results -- it gets much easier.
- Make paying off your credit card balance a goal. Set a timetable to achieve it. And stop using your card for the little things. Only buy what you have the money to pay for now.
- Use cash instead of credit cards! Better yet, don't carry your credit cards with you -- it will make you think before you make a purchase with cash only. But keep a receipt for your files.
- Get something back from your credit cards! We suggest finding a credit card that offers some type of reward (cash back, phone discounts, etc.) and always haggle for a low APR if you plan on carrying a balance. Credit card companies are so competitive now -- if you call your credit card company and tell them you've found a lower APR on another card, they'll most likely match it.
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