Have you ever reached payday and felt relief as the money hits your account, only to find that a few days later it feels like all your money is gone already? This is very common – a lot of people feel like they don’t have enough money for the things they want in life – a lot of people even feel like their money goes so fast they don’t have enough for their basic living expenses.
Luckily, there are ways around this. There are plenty of ways to keep track of your spending and income, and you don’t have to be a personal finance expert to find little ways to help you save money and stop yourself from spending too much too quickly. Let’s look at the main ways that money seems to vanish from our bank accounts – and more importantly, let’s look at how we can cut down on these.
What are expenses? Where can I cut back and how can I hold on to my money?
If we’re talking about the ways we spend money, we’re looking at expenses – that is, the money we spend. But we have to be careful here. This should include both necessary expenses ad discretionary expenses. There are a lot of different ways we spend money, and we need to consider all of these expenses.
It can be near impossible to completely cut out our necessary expenses – after all, we still have to pay rent, pay for heating or fuel, and buy food – though it is possible for a lot of people to lower their expenses in these areas. However, the biggest areas where we can cut down our outgoings are discretionary spending or treats. There’s nothing wrong with spending money on things that can bring happiness, such as hobbies or seeing friends, but if you have found that you have a flashy lifestyle that you can’t afford, you need to look at these costs as places to tighten your budget.
Let’s look into all the different expenses below.
Rent and utilities
Probably one of the biggest ways a lot of us spend money is on rent and utility bills. The monthly bills can be a huge drain on our bank accounts. A lot of financial advisors say that rent should be no more than a third of your monthly income, but this is unrealistic for some people – especially in areas with a high cost of living.
Unfortunately, cutting down on your bills can be hard. After all, we all need somewhere to live. Moving to a smaller home or a cheaper area might not be available for everyone – plenty of people live at the full capacity of their homes, and a lot of people have to live in a certain area due to work. However, if you can live somewhere cheaper, this can be a great way to save money fast. Some people even live in mobile homes to cut their bills. On the other hand, if you can work on saving money for a down payment, you might find that buying a house actually gives you lower monthly payments than renting.
Of course, even if you can’t move, you can look at lowering your bills. If you seem to be spending a lot of money on energy bills, you could look at getting a smart thermostat or smart meter to help track your usage. Then, if you are spending too much you can see if there are any times to cut down. It is also always worth checking with different energy suppliers for any special offers, or just to look for better rates elsewhere. With energy prices soaring, some people also look for better ways to stay warm, such as electric blankets.
Food – cheap doesn’t mean bad
Food is another big expense for everyone, but thankfully there are usually some ways to cut your costs here – though we all know that food prices are also increasing, making it hard to afford food. One simple trick you can use to cut your food budget is by making a list before you go to the grocery store and stick firmly to that list. Try not to be tempted by special offers or interesting-looking treats. This can help you avoid overspending on your weekly shop.
If you still find yourself spending a lot of money on food, it’s time to look at what you eat. If you eat takeout or fast food, you’ll likely be spending a lot, especially if you have children. Cooking meals at home is almost always cheaper. Beyond that, look at the foods you are buying. If you buy a lot of named-brand food items, try the cheaper store-brand items. Make a list of the store-brand ones you like, and the ones you don’t. Another way to save money here is to cut down the amount of meat and cheese you eat – there are plenty of other options for getting protein in, and cutting just one or two meat meals out per week can help you save.
Debts – bank loans, credit card debt, and more
If you have debts, you’ll probably see a lot of money leaving your bank balance without you even getting anything in return, or at least not obviously. Getting rid of debts can make a huge difference to how you feel about money. Once you have cleared down debts, you will suddenly find that the money you actually get to spend is much more than it was before. As an added bonus, once you are clear of debt, you will no longer have to worry about the possible repercussions of being in debt.
Of course, paying off debts is not easy. If you are struggling, you may need to look at ways you can get more money in. For example, you might look at picking up more hours at work, getting a part-time job, or borrowing money from friends or family. While it might seem pointless to borrow money to pay off a debt, it isn’t. If you have debts with high interest rates, you need to get rid of them as quickly as possible. It is even possible to get stuck with a debt where the interest is so high that you only ever manage to pay off the interest each month, meaning you make no progress to paying off the debt itself. If you can borrow money from a friend or family member, or if you can find a way to borrow money at lower interest, you can make headway with the amount you owe to banks or credit card companies.
If you have a lot of money in your savings, you also need to consider which is more beneficial – paying off a debt, or having money in savings. Quite often, you will find that the interest rates on a savings account is lower than the interest on debt. This means that if you have a debt and savings of the same amount, you will be losing money compared to paying off your debt.
Monthly payment plans
Let’s be honest, we’ve all wanted to buy something new and expensive at some point, whether that’s new phones, top-end PCs, nice jewelry, or fancy cars – and lots of companies make it easy to split payments over several months. However, putting items on a monthly payment plan can be problematic down the line. It is easy to get to a state where a lot of your monthly paycheck is going on paying off a new car, a new kitchen, a nice watch – and suddenly you have very little money to spend in the here-and-now.
The best way to save money here is simply to avoid monthly payment plans. When you buy any item on credit, you are almost certain to pay more for it in the long run. If you can save up to buy items, you’ll find that you’re paying less, and you’re also in charge of what you buy when. It’s also a great idea to shop around – look for special deals, reductions, and even look for second-hand items. Ask yourself – do you need a new watch if you can buy one second-hand?
Of course, this does not help much if you already have several items on payment plans. If this is the case, you can sit down and use financial planning to work out when you can be free of these costs. Work out if you can pay any off early, and keep track of when you’ll have paid all of them off. If you simply have too many monthly payments and can’t afford them, you may even have to look at getting rid of some of the items – you can let certain things become repossessed and you can buy a second-hand replacement instead. This is not always an appealing idea, but getting rid of monthly outgoings can have a huge positive impact on your mental health.
Cars – make sure they don’t cost more money than they need to
Whether you need a car for getting to work, or if you have a car for your own personal hobbies and travel, a lot of us have those gas-guzzling beasts on our driveways. But it’s important to always make sure that your car is not costing you more than it should.
The first great tip is to not get tempted by a car that’s more expensive than you need. Sure, you might want seat warmers, but if you only travel at night once a month, they might not be worth it. You might want a brand new car, but something a couple of years old might do just fine.
If you live in a city, a car might be a surplus expense that you don’t even need at all. It’s important to consider all the costs that go into running a car – insurance, tax, repairs, and of course fuel, plus parking charges if you are in an expensive area. If you do not use your car often, you might be able to downsize or even get rid of your car entirely, and just rent a car for when you really need one. This is especially good advice if you live in a large city or other urban area and have reliable public transport.
Splurges and treats
We all know the joy of buying something nice that you’ve had your eye on, or the excitement of finding a shirt that looks stunning and just splurging and buying it, but discretionary spending is a major place to check your finances and tighten your belt if you can.
Let’s be honest, we all spend more than we should at times, and unfortunately we can’t always cut down as much as we would like on our rent, bills, etc. Instead, we have to find savings from our discretionary spending or ‘fun money’. However, it’s not all doom and gloom.
Firstly, make a budget for how much money you intend to spend each week, or each month, on fun items. You can pick weekly or monthly depending on which suits you better, because this is all designed to help make sure that you do not accidentally overspend.
Once you have made a budget, stick to it, firmly. No matter how tempting it is to put something on a credit card, or to buy an item when it’s on sale, stick to your budget. Ultimately, you should only be buying items that bring worth and value into your life, so make sure that you are spending money on items that are worthwhile. You worked hard for your money, so don’t waste it on items that you don’t really want.
Reduce, reuse, resell
One great catchphrase to remind yourself when looking at your fun money is Reduce, Reuse, Resell.
Reducing is obvious – reduce the number of items that you buy. Ask yourself if an item is really worth buying. If it is, great. If not, then leave it where it is. If you already have two black shirts, do you really need another? Ask yourself if each item is worth the time you spent earing money, and you should find it easy to cut down.
Reuse can be harder, but it’s a great way to cut down your costs. First, look at items you have and are considering getting rid of – if you have a pair of trousers where the button has fallen off, sewing on a new button would be much cheaper than buying new trousers. If you have placemats that are getting tatty around the edges, trim them down to be coasters. Don’t be against second hand items either – a lot of items are perfectly fine to use second hand, and they can be much cheaper than brand new items. Buying second hand items also lets you still get the buzz of excitement in buying – you can do to second hand stores and look around, but not have to worry too much about your wallet.
Finally, Resell – simply put, don’t throw items away if you can sell them. We could all benefit from a bit of extra cash at times, and if you are getting rid of something in good condition, sell it on. If you have items you haven’t used in years, sell those. It’s a great way to make sure you have more discretionary money for the next thing you want to buy, or it can help you put a bit of money towards your savings – or both!
Money management – account for all the money you spend
It can be so easy to spend small amounts of money here and there, and suddenly find that it adds up to a lot. A single coffee might be $5, but if you buy one or two coffees every day, you’ll suddenly find you’re losing over $100 a month – which is $100 that could be going towards your savings goals. This is why it is so important to keep proper track of everything you spend. There are some banking apps that will help you with this, but you can also keep receipts and enter them into a spreadsheet if it helps you keep your records – it’s important to do this in a way that works best for you, as you need to be able to see, at a glance, what you spend.
It’s also very useful to have a rough idea of how much money you have before you leave the house each day. This can help make sure that you do not accidentally overspend and risk putting yourself into the red. Keeping track of all your spending, big and small, can really help with this.
Plan when you will spend money
This high seem too regimented for some people, but once you have an idea of how much money you spend on a day to day basis, it can be easy to give yourself a spending limit, and decide when you will allow yourself to spend money. If you don’t need to buy anything one a normal day, you can tell yourself not to spend any money – and sticking to it will help make sure that you are on the path to reaching your savings goal.
If you have a day when you intend to spend money, you can set yourself a limit. Either you can add up your purchases as you go, or you can withdraw cash and only take a certain amount of money out with you – though you might want to have a card in your wallet for emergencies, as long as you know you won’t be tempted to go over your spending limit. Planning ahead like this can help make sure that you keep to a budget, and it can curb the desire to make impulse purchases.
In fact, carrying cash can be a great way to limit your spending without having to set a firm number. A lot of us use contactless cards or phone payments for a lot of our purchase choices, but this sometimes seems too abstract. If you have to hand over cash for every purchase, plenty of people find it makes them really appreciate the value of what they are handing over.
Learn more about your finances
Most schools don’t teach nearly enough about personal finances, and this can lead to people having really bad financial relationships as adults. However, it’s never too late to learn. Learning some basic mathematics and improving your financial education can be very beneficial. You don’t even have to learn too much – once you know how to track your finances, you will be well on the way to fully control your relationship with money. You can also learn about various financial products – there is a lot of information about all kinds of financial products available from banks and online. Taking advantage of all this information means that you can avoid loans with less favorable terms, find the best savings accounts for your needs, and make sure you pick the right banks. While learning about finances can be a scary thing to try, and it can be very confusing at the start, there are so many reasons to learn about your finances.
Get the right mindset about your money
As mentioned above, many people have unhealthy relationships with their finances. This is especially true if you are in debt, or if you have ever been in the red, whether that’s with the bank, credit card companies, or whether you borrow money from family. However, this is not a reason to shy away from your finances, in fact, it’s exactly why you need to make sure you have the right mindset about your money.
For some people, having the right mindset about money means budgeting carefully, but for some people, it will be as simple as not being scared to look at your bank balance – after all, you can’t improve your situation if you can’t face up to it. A great way to start retraining yourself to handle your finances better is with money mantras. These are sayings and catchphrases that you can use to remind yourself to work hard on your finances, not sabotage your savings goals, and to help remember why you want to cut down your outgoings.
Earn extra money
If you still find that your checking account is going down too fast and you can’t cut your monthly expenses or curb your spending habits, you may need to find a way to earn more money. While high earners still have to keep track of their spending and make sure not to overspend, having a bit more money coming in each month can really help make sure that you have enough to make ends meet, and it can help you start saving.
It can be hard to find ways to earn more money, especially if you are already working a full time job, or if you have to care for children or sick relatives. However, there are some ways to earn more money to help improve your financial situation.
If you are working a part time job or have spare hours in the day, it might be worth looking for a part time job or additional hours. However, you need to be careful not to burn out – working long hours can be physically and mentally tiring, and you might find that you no longer have the time or energy to do things like cook cheap food, so you could end up spending more in fast food than you end up making from your extra hours of work. One middle ground for this is to try finding freelance work that suits your skillset – this way you can work when you have energy and spare time, and a lot of freelance work can be done from the comfort of your own sofa, meaning that you can earn a bit more money in the evenings.
Another way to earn extra cash is to start up a small business for passive income – don’t be fooled though, these kinds of ideas can be very challenging and time-consuming, at least at the start. You will probably find that you have to put a lot of time and effort in to get even a small business off the ground, but once you have, it can provide a valuable second line of income for you.
If you are in steady employment, you can also start looking for promotions, pay rises, or looking to change the company you work for and trying to find a higher salary elsewhere – these days, it is often possible to get a more competitive salary by moving to a new company, rather than vying for a promotion or a raise in your current company.
It can seem like money is always leeching away, often as soon as it hits our bank accounts. However, there are ways we can combat this. The steps are pretty simple – first, track your outgoings. Look at where you spend money, so you know exactly where it all goes. Next, look at ways to reduce those outgoings. Find the ‘bad’ outgoings – an item on a payment plan, an unnecessary purchase, anything that you can cut down. Finally, look at ways of increasing your income – a higher income means you can cover your outgoings and even put some into savings.
Throughout your mission to tighten up your finances, try to keep a positive mindset. Finances can be hard to go through, whether you find them scary or depressing, but remember that all of your hard work sorting your finances is so that you can have better financial freedom in the future.