Spending less starts with knowing more about your financial habits. Here are five steps to help you get a better handle on your money—and reach your savings goals.
1. Know where your money goes.
It’s essential to know what your monthly expenses are in relation to what you earn. Make a plan with a budget that tracks your income and spending.
2. Determine needs vs. wants—and cut where you can.
With your budget in place, identify your needs vs. wants. If you lease a vehicle with high payments, consider ending the lease and buying a cheaper, used car. If rent is high, maybe a less trendy neighborhood or new city would bring a cheaper cost of living. Also look at how much you’re spending on wants, such as dining out or a new pair of shoes for your collection.
3. Make the most of “monthlies”.
Regular monthly costs add up. Out-of-shape health club memberships, idle public transportation accounts and unread magazine subscriptions aren’t cheap. Figure out what you can eliminate.
4. Cut out impulse buys.
If window-shopping usually turns into “Thanks for shopping,” find ways to cut down on unplanned purchases. Spontaneous lunch outings and upgrading to the newest tablet can derail your money goals. When the urge strikes, refer to your needs vs. wants list—and focus on the bigger picture.
5. Take an interest in interest.
If you have a mortgage payment or a car loan, you know interest is a big part of your monthly payment. Find ways to lower interest payments over time by refinancing or making an additional principal payment or two each year. This helps you build equity, reduces the life of the loan and minimizes interest paid.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Whether you’re pulling your hair out because you can’t seem to save enough money for your emergency fund or you’re having a hard time dealing with your significant other’s spending habits, various types of money anxiety can be triggered by what one expert labels as “thinking traps.”