Spending more than you make, or living beyond your means, can wreak havoc on your finances. If you often find yourself in this position, it’s time to take control of your spending.
Here are five ways you can stop spending more than you make and start living within your means:
Examine how and where you are spending your money
Have you ever gotten to the end of the month or pay period and asked yourself, “Where did all my money go?” It’s very easy to get to this point if you don’t track your spending.
Luckily, figuring out where your money is going each month is pretty simple, especially if you access your bank accounts online. Go down the list of debits and add up how much you spend on trips to the grocery store, gas, dining out, bills, and other expenses. Also, look at credit card bills to see all the purchases that you have there in a month. If you use cash, try keeping receipts for a month, to see where the cash is actually going.
This can be an eye-opening experience. You may find that a lot of your discretionary spending is on those special cups of coffee that you love, or on impulse purchases that you later regret. Take a look at where you spend the money and determine whether that reflects your financial priorities. For example, if you’ve been trying hard to save for that tropical vacation you want, and you just can’t seem to get ahead with the savings, perhaps this assessment of priorities will show you ways to make that more doable.
Next, look at HOW you are spending money. For example, if cash just seems to run through your fingers, or if you always make those impulse purchases on a credit card, perhaps you need to reduce your access to the credit card or to cash. By figuring out how you are tempted to overspend, you can take steps to prevent that temptation in the future.
Another way to spend less money is shopping sales and using coupons. Once you have a clear picture of what you need, like a grocery shopping list, look for sales and coupons that will help you reduce overall costs.
Live by your budget
If you don’t have a budget, now’s the time to make one. Once you track your expenses, start allocating certain amounts to your monthly expenses, based on the information you have gained from keeping track. You will want to set some goals for yourself, short-term, medium-term and long-term. That will help you include room in your budget for those things that you need to save for.
Making a budget is the easy part, but sticking to it can be difficult. Some people use a cash-only basis for your gas and food. However you do it, it is important to find a system that works for you, letting you track your spending so you can stick to the budget. It is often helpful to set up your monthly bills to be paid automatically online to avoid costly and unnecessary late fees.
Make more money
If you’ve cut expenses to just the bare essentials and are still struggling, one way to stop spending more than you earn is to increase the amount of money you earn. Of course, it’s easier said than done, but it is possible.
Pick up a part-time job on the weekends, ask your boss for a raise, work overtime if possible, or brush up your resume and apply for jobs that make a little more money. Look for things you can do around the house too; for example, offering childcare during the day, if you’re a stay-at-home parent, can bring in more income.
Remove spending temptation
If you routinely spend more than you earn because the temptation got the best of you, remove the temptation to overspend entirely. This could include shopping with a list, using cash only, deleting saved credit card information from your favourite online sites, or leaving your debit and credit cards at home when you go out.
Many people use shopping as a recreational activity. If this describes you, try finding other things that interest you to spend that recreational time on. Explore a variety of activities to find something you really enjoy. The added bonus there is that it will likely expand your social circle as well, and may even improve your health.
Pay down your debt
Take a moment to add up how much money you pay each month towards debt. If you have a number of credit cards and loans, chances are this amount is pretty high. Think of everything you could do if you didn’t have those payments! Try to make a plan to pay down your debt to free yourself from high-interest monthly payments.
If you are paying only your minimum payment on credit cards each month, nearly all of your payment is going towards interest. This means that the debt itself could take years to pay off. If you cannot start to pay more than the minimum each month to beat that interest trap, it is likely time to consult a Licensed Insolvency Trustee to discuss other options that are available to help you eliminate your debts and high-interest costs. The sooner you seek help, the more options you will have available to you.
If you’re caught in the cycle of spending more than you make, these tips can help you get back on track. If you need more help, give LCTaylor a call at 204-925-6400 to book a free, confidential consultation.