Being in control of your finances is crucial to financial well-being. To establish this idea of well-being, you should earn more and spend less so you can save money in the long run. To avoid the conflict between your spending and saving, you need to follow a spending plan and question yourself if you spend more or less than you earn in a month.
What part of your income are you able to save every month? What do you do with raises, bonuses, tax refunds, etc.? Arranging a spending plan can help you prioritize your spending and saving by managing your primary and unnecessary expenditures. If you are worried about how to prevent your spending clashing with your savings, here are some tips:
1. Invest your increment
One of the best ways of spending less and saving more is by saving the increment you get. Some of the increment might get nullified by the inflation so you may not be able to save the whole amount, but there will still be some percentage that you will be able to save.
People tend to spend more money if they have a higher bank balance, but if you don’t keep the increment in your bank, then there would be nothing left to spend! Instead of gradually getting used to higher expenses, it is best that you keep your increment surplus in investments and put it on auto mode, so your bank deducts the surplus before you come around to spend it and blow it away.
Commit to a monthly investment like a mutual fund, SIP or a bank deposit for a savings account, so a portion of the increased income gets saved at the month beginning. You can do the same with your bonuses but remember to save some portion of the increment for expenses and personal treat as you have indeed worked hard to earn that money so spend some to celebrate.
2. Keep separate accounts
Too many bank accounts can be confusing and hard to manage but having separate accounts for separate functions serves the purpose. An extra account can help you a lot for handling your savings better and keeping your investments and savings secure.
Get a separate account for your savings, a separate account for fixed monthly expenses and another for monthly instalment. This way you keep money in distinct buckets so even if the expenses are higher in a month, your savings won’t bear the brunt. Moreover, foolproof your separate accounts plan with the idea of not using a debit card for the designated savings account.
3. Spend and save equally
We all work super hard to be able to enjoy the nice things in life, so it doesn’t make sense to deny some simple pleasures in life like a nice holiday with family, a lavish dinner with friends, a classy garment or a feature-laden mobile phone.
But when you treat yourself to these luxuries in life, remember to save the equivalent amount in your savings account and treat it as the luxury tax on yourself. This way, you won’t just spend but also save the amount that you are spending, and your money will grow. Consider it a luxury penalty for unplanned shopping.
Moreover, by doing so, you will be discouraging yourself from splurging on non-essential items as you will be spending twice the amount of expenses by matching the expense amount in savings.
4. Refrain from impulsive shopping
A lot of families end up spending a couple of thousand dollars a year on items they didn’t plan to buy. By cutting back on impulsive shopping, you will be able to limit the clash between shopping and spending.
There is a simple way of saving money when buying groceries and other essential items. Make a list! Yes, you heard it right. Make a list and stick to it. Research from the University of Pennsylvania indicates that people can save up to 23% on their grocery bills if they avoid impulse spending.
Another great way of saving money while shopping is to avoid credit cards, but not all plastic money. You can take out loans for unemployed with bad credit and no guarantor if you are out of job and use the money wisely. Don’t treat your credit card as a source of income but rather a backup finance plan. Shopping with limited funds in your wallet is quite different than shopping with a credit card that gives you access to way more funds. Use plastic money wisely as it also gives you access to several discount deals, cashback, offers, etc.
There are more things that you can do to control your spending and avoid the clash between spending and saving. There is nothing worse than relying on savings to manage your expenses, but your morale gets boosted when you can save money; so make small changes as starting small will give you significant returns.
Consider taking homemade lunch to work as it will help you cut back on the money you usually spend on eating out, which costs considerably higher than eating homemade lunch. Another great idea to save money and avoid spending too much is by paying off the credit cards as accumulated interest costs higher in the long run which you can avoid by paying off your credit cards in the short run.