How many of you have been able to keep your New Year’s resolution for improving your finances? Although most of us have good intentions when it comes to things like mastering our saving skills, we often struggle to achieve our goals. In fact, only around one in three American households manage to stick to their spending rules every month.
The trouble is that most of us are approaching saving with the wrong mindset.
You can use all the envelopes and cash-saving apps in the world, but you don’t approach spending with the right frame of mind, you’re never going to achieve your goals.
Fortunately, the following tips can help with that.
1. Invest in Your Future
Knowing how to spend your money wisely isn’t always about saying “no” to every purchase. Sometimes, the best thing you can do is simply make sure that you’re spending cash on things that are going to have a bigger pay-off in the long-term.
For instance, buying yourself a pizza right now when you can’t be bothered to cook has an initial benefit, but long term, it harms your bank account and your waistline. However, taking out a personal loan so you can afford a computer for your online learning efforts pays off in the long-term. It gives you more opportunities to apply for promotions and better-paying jobs.
2. Think like a Bank
When you take a loan out from a bank or even an online lender, they charge you interest on what you borrow.
A good way to stop yourself from spending money frivolously, is to take the same approach when you borrow money from yourself. The next time that you decide to take $20 out of your savings so you can go for a few drinks, tell yourself that you need to repay $25 from your next income.
Gradually, the demand to pay back more than you borrow will either stop you from using your savings as frequently, or it will ensure that you have more money put away for the future by the end of the year. It’s a win-win situation.
3. Give Yourself a Buffer
If you’re craving something that you desperately want to buy, it’s not always easy to refuse yourself – even if you have the best intentions. Sometimes, you’re going to make a mistake and buy something that you know you shouldn’t. That’s where your savings buffer comes in.
Have a small amount of money in your bank account each month that you can assign to frivolous purchases. That might just be around $50 – whatever you can afford. Once you run out of buffer, force yourself to take at least 24 hours before making any other purchases. This will push you to think carefully about whether buying something is really worth it.
4. Pay All Your Bills at Once
Have you ever bought something, thinking that you had enough money in your bank account, only to discover later that you had forgotten about a crucial bill? That’s a common problem for many Americans, and one that can end up with debt and extra fees to worry about.
To reduce your chances of spending money that you don’t really have, try arranging for all of your major bills to come out of your bank account as soon as you get paid each month. This will give you a better insight into how much money you actually have to spend. To take this trick even further, add money for your savings account into your list of bills to pay too. If you treat your savings like just another bill, you’ll be less tempted to spend the money that you should be saving straight away.
5. Try Some Spending Fasts
Finally, when you’re used to spending money on a regular basis, it’s often hard to break that habit straight away. Ultimately, if you want to replace your money-spending habits with something healthier, you need to expose yourself to a life without cash one step at a time. Consider setting aside one day a week when you don’t spend anything at all.
This will be a day when you take your lunch to work with you, so you’re not spending anything in the cafeteria. You might also walk or bike to work so that you’re not spending cash on petrol. Over time, you’ll begin to recognize just how easy it can be to get by without spending money if you’re well-organized. You may even be able to go without cash several times each week.
Speak Your Mind