Past spending can be more accurate because you can’t go back and change what you have already done. With a spending plan, you don’t have to focus on day-to-day or month-to-month expenses as much — they don’t really change that much anyway. People treat cash differently — and that’s OK. For some people, it helps to keep less cash on hand so that they are not tempted to spend it. Other people prefer to spend only cash because it’s easier to track how much is left. If these people don’t have the cash in their wallets, they don’t make the purchase. Cut down on daily trips to the coffee shop or convenience store — challenge yourself to bring your own snacks from home, take a walk on your lunch break rather than buying meals out, and invite your friends to join you in a savings challenge. Take advantage of discount offers, coupons, and loyalty programs. Shop at thrift stores, garage sales, or flea markets whenever it makes sense. Invite your friends and family to have clothing swaps. Use free community message boards (online and in person) to barter goods and services.
Having a list helps you resist spending on impulse. Plan ahead with coupons to save even more. Find free or low-cost activities and challenge your friends and family to spend less as part of your group outings. You could even make it a family or group goal to see who can come up with the most unusual or creative ways to spend the least amount of money. Cutting back spending can be very hard if you haven’t considered your motivation for buying things in the first place.
Ask these four questions when trying to decide whether to buy that item or not. What is my reasoning/rationale for buying this particular thing? What is the purpose behind making this particular purchase? What do I hope to get from buying it? How do I think that this purchase might make up for something in my life that is lacking? What might be cheaper alternatives to this purchase? What would be the reasons to buy the more expensive version? If your spending habits are a result of unhealthy motivations — such as trying to fill an emotional need or “keeping up with the Joneses,” you will want to address the root problem. Even the best spending plan won’t work if your spending is out of control for emotional or psychological reasons. Sometimes, all it takes is paying attention to your spending and watching your motivations. In more serious cases, you might benefit from counseling. It’s important to know that careless spending will not take away personal pain, and it could lead to serious financial problems.
If you’re really having trouble getting your spending under control, continue to ask yourself: “Do I need it?” If the answer, consistently, is “No,” but you keep spending anyway, it could be time to investigate other possible root causes of your overspending. Now that you have set goals, examined the evidence from your past spending habits, and thought about why you spend the way you do, it’s time to find the money to meet your goals. If you’re wondering, “Where can I find more money?” don’t be discouraged. It’s estimated that the average family wastes 30 percent of its money through unexamined spending. You are taking the first step by simply paying attention to your own habits. Develop a savings plan using these strategies to help you get started saving, pay yourself first, use automatic savings methods, save all or part of a certain type of income, establish savings buckets, and create an emergency fund. Pay yourself first. List savings as a fixed item in your spending plan. You are less likely to spend money you already have earmarked for savings. Use automatic savings methods. Set up an automatic transfer from your checking account to a savings account each month. Save all or part of a certain type of income. Designate your tax refund, annual bonus, tip money, or proceeds from garage sales to savings. Establish savings buckets and watch these goals get closer as savings grow things you want, holiday shopping, vacation, and retirement. Create an emergency fund. Start with a goal of $500 (then build it up to the recommended guideline of three to six months’ expenses). Keep it separate from other savings. Use it only for emergencies, and replenish it after you get back on your feet.