How to Develop Smart Spending Habits
Most of us are familiar with New Year’s resolutions. We’re also familiar with breaking them. In order to make the changes last, we have to practice them regularly. Some say it takes about two weeks of practicing our resolutions before they become a habit, while others may find it takes longer. If getting your spending under control is one of your goals, here are some ideas to help make your new habits worth keeping.
Track Your Spending
Where is all your money going? Take a journal with you everywhere you go or download a free app for the same purpose. Write down everything you spend, including the 98-cent pack of gum you grab at the store, the $5 coffee drink that’s part of your morning routine, and the $1.25 can of soda that you get out of the vending machine.
Create a Budget
Your main goal is to spend less than you make. Sit down with a calendar and pencil in all the events, birthdays and holidays for which you spend money each year. Also jot down annual expenses such as car registration, tax preparation, etc. As you go through your budget, consider just how much you’re spending for these items and whether you can trim some expenses. Create a long-term budget for the year and also one for each month.
Plan for Big Purchases
If you’re expecting to make a one-time purchase of a stereo, large-screen TV, computer, smart phone, or even something bigger, such as a car, plan for it. Put aside some money toward this purchase every month and it will be easier to stay on budget.
Pay cash whenever possible
This will help you control your impulse buys because paying cash makes it seem more real. If you have to shell out $6.95 from the money you brought to the grocery store, perhaps that magazine with the latest info on Brangelina is not something you really need.Don’t carry too much cash with you or have too much on hand at home. You’ll be less tempted to spend it and you’ll give yourself more time to consider the value of a purchase.
Put Your Money to Work
You’re never too old to start saving. Of course, you’ll see bigger gains in compound interest over the years if you start young. If you’re not a spring chicken anymore, you can still benefit from investing in a Roth IRA, mutual funds and even short- to intermediate-term bond funds. Make an appointment with your financial adviser or bank to discuss your options.
Money is a Resource
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Think of money as a resource. Like any resource, it needs to be managed. Whether you have a little or a lot of money, financial planning involves setting some goals and developing a strategy to help you reach those goals. Take charge of your finances, live within your means, and you will find your New Year’s resolution is indeed something you can achieve.