With the year nearly over you might be thinking about New Year’s resolutions to help you kick a few bad habits in 2013. Thinking about how you spend your money is a great place to start! You’ll find a wide-range of articles dishing out spending advice on the Internet, so today we’ve gathered just five of the easiest, most simple to follow tips for you:
1) Spend less than you earn
The easiest change you can make in improving your spending habits is to carefully track how much you are spending. It’s easy enough to say ‘spend less than you earn, but to make sure that you actually do this you need to put systems in place. If you’re serious about changing your spending habits, keep a spreadsheet of all your outgoings for a week. You’ll easily see how much you are spending from your salary and what are essential and non-essential items. Why many people do overspend is because they don’t carefully keep track of their money and have no idea what proportion of their money is going on non-essential items!
2) Be careful with your credit card
One of the great things about living in the world of the Internet and credit is that you can make impulse buys. Even if you don’t have the money in your account many people are tempted to make a purchase on a credit card. But you always need to consider the consequences! Do you have enough money to make the regular card repayments every month? Credit card interest rates can be very high, so you need to be extra careful. There’s also much to be said for the satisfaction you’ll get if you save up first and then make your purchase. The item you’ve bought will represent your hard work, rather than the ease of obtaining credit.
3) Save a fixed percentage of your income each month
How much a person can afford to save each month varies from one individual to another. Some have more disposal income, while others find themselves more stretched. But even if you save only a very small percentage of your income every month, this is well worth doing. You can set up a direct debit to transfer a fixed amount from your main account into a second account to make this easier. Try and find an account that will pay the best interest rate so you make some money too! The golden rule is to always think of the surprises the future can bring. There will be times when you need extra money to cover an unexpected event, and the portion of your salary put away in a second account will help cover this.
4) Be wary of deals and upgrades
Every time you are confronted with a deal or an upgrade, such as a larger meal for only a little extra cost, or what seems like a fantastic 3 for 2 offer, stand back and think about whether you really need it. You would be amazed about how much a little extra spending on upgrades and deals adds to your total expenditure for a month. Can you remember all the deals you bought and the extra costs for the past month? These probably total more than you think. If you avoid the deals, the total money you might save may even buy your shopping for an entire week! This is why making a detailed budget spreadsheet is important if you are serious about changing your spending ways. Be wary of deals, as they are designed to make you spend more. Don’t let a bit of extra spending here and there become a large part of your outgoings.
5) It is OK to take out a loan, but remember to consider this carefully
Most people find they have to take out a loan at some point. Sometimes urgent repairs need to be made to a car or home, or you may need money to cover an unexpected event. There are many companies out there who offer short-term loans, which should help ease your cash flow problems in a crisis. For example, Wonga is one of the best-known companies, and it has subsidiaries around the world. So if a loan is necessary, investigate your options carefully and make sure you can pay back whatever you borrow on time. If not, you should not take out the loan. If you have already started making improvements to your spending habits (such as by saving a small percentage of each month’s income) it may not be as difficult to pay back a loan as before. Changing your broader spending habits should allow you to take out loans more responsibly.