I’ve always been pretty good with saving money and I’ve never been a big spender. If this doesn’t sound like you, that’s okay, it doesn’t mean you can’t learn how to manage your finances a little better. I live in a high cost of living area and I still get to do things I enjoy, but I am very intentional with my money. I have long-term financial goals and it’s in my best interest to make sure that I have a good hold on my personal finances. Whether you’re thinking of the future like me or you’re just looking to cut back on your expenses, these 5 simple rules will take your savings to the next level
One of the simplest and most powerful ways to manage your expenses is to track them. It doesn’t take up a lot of your time, all you need is to write down everything you spend money on – I recommend using a spreadsheet. Your $1,200 a month rent? Track it. Your $5 cup of coffee? Track it. Track. Everything. This will give you the most accurate insight into what you spend your money on and will help you find the areas that where you’re spending too much. It will be hard to create a budget for yourself without first understanding exactly what your finances look like. It may feel a little tedious to track everything at first but over time it will become a habit. I also try my best to track an expense as soon as it’s made so that I don’t end up forgetting about it.
Sleep on It
I tend to make impulsive shopping decisions so this one has really helped me cut back on unnecessary spending. The idea behind this trick is that you give yourself some time to think over a purchase, whether it’s big or small, and you’ll find that once you’ve given yourself time to think it over, you really don’t need or want it anymore. It may not seem like a lot of money at the time but as someone who constantly spent $100 on a Target shopping trip for stuff I didn’t even need, I can assure you those impulse buys can add up quickly.
Make a Budget and Stick To It
This one might be the most important of all 3. If you never set any spending limits, you’ll most likely end up spending more than necessary. It’s also important to create a realistic budget or you’ll end up feeling like it’s too difficult and quit. It’s not realistic to say that you’ll lower your budget from $2,000 a month to $1,000 overnight. There are tons of budgeting apps and websites out there to help you get started but the best way to begin is by creating categories for all of your expenses. I built my budget around the main categories I spent my money on which were housing, utilities, and groceries. Then, I began to create smaller categories that didn’t account for a big portion of my overall budget but still needed to be included, such as my monthly subscriptions (netflix, gym, spotify) and clothing.
Don’t Adjust Your Standard of Living Because of a Salary Increase
This one can really sneak up on you. It’s easy to feel as though you need to spend more money since you’re making more money but you really don’t need to make any significant changes to your budget overnight. Just because you got a $5,000 yearly increase in your salary doesn’t mean you suddenly need a brand new car or a larger apartment when you were doing just fine without those things pre increase. The best way to maximize your savings rate is to spend below your means and increase your income. Whenever you come into more money (such as a promotion, bonus, or a tax refund) don’t just find a new ways to spend that money, instead find ways to grow that money by investing it.
Find Ways to Slash Your Budget
Finding ways to cut your budget in a significant way will be much easier once you start tracking all of your expenses. This will help you see exactly where you’re spending your money. It will also help you clearly see what areas of your spending can use a little attention. If you’re spending $200 on a gym membership but only go to the gym 2-3 times a week then maybe it’s best to consider switching to a cheaper gym, where I live there are gyms that can cost upwards of $200 a month and gyms that cost $10 a month – you really have to ask yourself what you’re paying 20 times more for and if it’s worth it.
You may also find recurring expenses that you no longer need but never canceled your subscription. I had a friend who was paying for a netflix account monthly and never used it! Canceling this only saved her $180 a year but you’d be surprised at how many expenses you can cut out of your budget that you hadn’t thought of before and these will definitely add up in the long run.
These 5 rules will help you build a strong foundation and will make saving money a lot easier!