Now that you’ve spent at least a month tracking your spending habits it’s time to take a close look at where that money is going. This is going to look different for everybody. Maybe you go out to eat several times a week, or that drive-thru coffee is adding up. For some it will be splurging on clothing, movies or impulse buys. And for many, I suspect there is credit card debt or student loans taking a big chunk of your paycheck. <– we’ll get to that in a bit.
Once you’ve identified your biggest “unnecessary” spending area it’s time to tackle it. If you frequently pick up a coffee on your way to work – cut back. Make your coffee at home a couple mornings a week. If that’s too big of a sacrifice consider downsizing the cup size you purchase. Chances are you don’t need the extra calories and caffeine anyway. If you buy movies or books, try checking out your local library or free ebooks. Curb impulse buying by avoiding cruising the mall when you’re bored. Have a specific shopping list when you do go to the store and only buy what’s on your list.
Another idea to consider is keeping a large change jar. Every evening empty your pockets or change purse into the change jar. You’ll be surprised at how fast that adds up. Kids love to help sort and count piles of change. Have them help you roll your coins and take them to the bank. Tempting as it is, avoid the change counter machines in the grocery stores. They keep a portion of your total. It’s *your* hard earned money – take the time to count it yourself! This is especially easy if you do it while watching a movie (that you just rented for free from the library).
Now that you’ve freed up a little extra money each week what do you need to do with it?? I’ll tell you. SAVE IT! I know it’s so tempting to spend it or to apply it to the growing credit card debt. Unless you already have a good sized amount in your savings account it’s actually not a good idea to apply that extra money to debt. What happens when the car breaks down unexpectedly? Or you have an emergency trip to urgent care? Or your washing machine floods the laundry room? Right. You pay for it with your credit card. If you have an emergency savings account you can plan for those emergencies without adding to your debt.
Save up that extra money until you have at least $1,000 in your savings account. If you’re like me and you can justify that new pair of jeans as an emergency then find someone that will hold you accountable. All emergency spending has to be cleared through them. It’s so important to have that savings account if you plan on getting out of debt.
Finally, there are some of you that are going to look at your spending and you’ll find you don’t have a lot of extraneous spending to cut back on. Take a closer look. Are you paying for a cell phone and a home phone? Do you need both? Be sure to check you aren’t paying for more minutes than you actually need on your cell phone plan. Can you cut back on cable? Maybe drop that movie tier – since you’ll be renting movie at the library for free anyway. The grocery budget is another place to take a closer look. Most of us give in to impulse buying at the grocery store. I’ll be writing a post on grocery shopping in the near future. Is it possible to shop around for cheaper auto insurance? Check the gas budget. Maybe you can combine errands or carpool. Or drop the gym membership and walk to some of those errands.
Your goal should be to cut back on spending and pad your savings account!
August 1, 2008 at 8:05 pm
Good Ideas!