The New Year is a great time to resolve to accomplish some of your financial goals. One of the most common resolutions (after losing weight) is to spend less and save more. Here are ways to spend less money that are simple, specific, and concrete enough to keep.
Keep a budget. A budget is the best way to learn where you are spending your money so you can make changes. Keeping a budget is a big resolution, and requires lasting commitment and discipline. Try keeping a budget for the month of January. Even the lessons learned from budgeting for one month will help you reduce your spending all year long.
Keeping a budget works like a diet. Some diets require you to write down everything you eat and count calories, shares, ranking, or other food units. The point of this process is three-fold. First, it makes eating more painful, causing you to eat less. Second, it makes you aware of how often you are eating, and causes you to ask the question, “Am I really hungry?” And finally, it gives you a score for your food selection, helping you avoid the 20% of your eating choices that cause 80% of your weight problem.
Creating a financial diet works the same way. First, it creates a system that makes spending money more painful. Simply keeping track of all your purchases in a small spiral notebook makes purchasing something difficult. Reserve a page for each budget category (groceries, eating out, gasoline, etc.) each month. If you don’t keep a budget, you can still make spending difficult. Try paying cash for all your purchases and limit the amount of money you get from an ATM each week. For any impulse purchase that you had planned before entering the store, force yourself to wait one week to see if you still think it is a good purchase.
Second, try to reduce those expenses that you don’t consciously make. Review all your regular expenses that are paid on a monthly, quarterly, or annual basis or paid automatically from your checking account. Find out what the cheapest basic service is for your phone, cable, Internet, and insurance. Compare that to what you are paying now, and ask if the extra features are really worth the cost. A gym membership that is used three times a week might be worth it, but one that you have let lapse for weeks isn’t. For each expense you should ask, “Is this really a necessity?” Any reduction in your regular bills saves money every year.
Finally, try to find the 20% of your purchase choices that cause 80% of your spending problems. Pick four budget categories where you suspect the problems might be. Rank them in order of likelihood. Then examine one budget category each quarter for ways of reducing your expenses. Put a reminder now of what category you are targeting on your calendar at the beginning of each month. Throughout the month look for ways to reduce your spending in that category. Ask your friends and co-workers for suggestions. Do an Internet search for additional ideas.
If you are married or have children, you must involve the entire family in the process to achieve success. Schedule a family meeting each month to share ideas and review progress. Even the youngest children will learn from the discussion, and raising financially responsible children is a worthy task.
A fee-only financial planner can also help. They can act as a personal financial coach, offering suggestions, sharing ideas, and keeping you on track to reach your financial goals.
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