All of us have spending leaks and find it hard at times to cut spending. We’re spending money on things we shouldn’t. We’re all guilty of it, but from time to time we need to go back to personal finance 101 and take a hard look at how much we are spending daily to cut spending.
No matter how savvy you think you are, there’s a good chance you waste little sums of money here and there – and they could be adding up to £400 a year. So, if you want to develop better habits and become more intentional about avoiding waste, here are some tips on how to make good use of what you already have to help cut spending.
Spend Less Money and Take Inventory
How many transactions are charged to your credit card that you forgot about or know about and don’t use but don’t bother cancelling? Whether its £11.99 a month for Netflix that you don’t watch and £40 a month for a gym membership you don’t use, it starts to add up.
Sit down and go through your credit card transactions. Stop those subscription expenses that you don’t use.
And when you hand over your card for little things like coffee or a snack, you don’t feel like you are losing anything during that transaction. You’re just pulling money out of your bank account you don’t see.
Do you really enjoy that coffee each morning or is it just part of your routine on your way to work? If you sit down and drink your coffee and read the paper, fair enough. That is enjoyable. But if you just grab it after you leave home (where there is coffee) and before you get to the office (where there is coffee), you’re wasting money. It’s just a habit. A habit you are wasting money on with no real return.
Track Expenses as they happen
Because spending these relatively small amounts of money doesn’t feel like spending money, you have to make it more painful. Every time you spend money, write it down as it happens in a little notebook or log it into a spending tracker app.
Or if you really want to be strict, start using the envelop method which is effective and works. You make an envelope for each of your non-fixed expenses: things like gas, groceries, clothes, entertainment etc., and budget a certain amount of money for each envelope. When an envelope is empty, you have no more money to spend in that category until the following week or month.
Optimise your living situation
There is one sure way to stop wasting money: get a cheaper living situation. That might mean moving home with your parents for a time, getting a roommate, moving to a cheaper apartment or home, or moving to a location with a lower cost of living that where you are now. The personal finance rule of thumb is to spend no more than one-third of your income on rent.
Sometimes we can feel like we have too much living space. The bigger your house, the more stuff you buy to fill it, the more it costs to heat and cool, the more time it takes to clean and maintain it.
Find a cheap phone plan
With many of us spending more time indoors and leaning in the home WIFI, there’s a good chance you’re spending far more than you need to on data. Fortunately, changing your monthly bundle can be easy, especially if you’re out of contract, so its worth keeping an eye on your usage to see if you can shave a few pounds off your bills.
If you are out of contract, you can make even bigger savings by simple switching away to another network. There are many low-cost mobile networks in the market offering cheap deals on short term one-month contracts.
Bring a list to the grocery store
Making a shopping list of the items needed for a week’s worth of meals can help prevent impulse buying at the supermarket. You can keep an ongoing list of your grocery needs, post it somewhere (the fridge perhaps?) and add items as you notice they are needed.
When making a shopping list, it is worth remembering that many supermarkets pick certain items weekly to sell at a discount to attract customers. You can check online to find out what these items are. If you plan your meals around these items, you can make significant savings on your shopping.
You can save even further by planning meals that use the same ingredients to ensure that nothing is thrown away unused because it is out of date.
Buy Quality Goods
Although higher-quality items typically do cost more than their bargain basement cousins, don’t assume that a higher price tag means an item is going to be better. You can find plenty of high-quality, affordable items at second-hand or consignment stores. Knowing what to look for makes it easier to spot quality products. Always closely inspect every item before you purchase it to make sure it will survive whatever you put it through.
Most importantly, don’t equate designer with quality. In the case of “designer labels,” you’re often paying for the name or packaging, not the integrity of the product.
Limit Eating Out
Eating out is easy, and it usually tastes delicious, but it’s expensive. Food takes up a large chunk of most people’s monthly budget, so breaking fast food and restaurant habits are some of the easiest ways to cut your overall spending. This can be an especially useful cost-cutting strategy for those who experience an unexpected pay cut or job loss.
Luckily, when it comes to food, it’s possible to cut back costs and still eat well. Let’s say your favourite fast food meal costs £8, and you only eat out for lunches during the workweek. That may seem reasonable, but the costs add up to £40 a week, or £160 every month. When you consider eating out more than five times per week, or eating out with children and other family members, the costs quickly multiply.
If you are spending a lot of money on eating out, you may be surprised at just how easily you can save by cutting back food costs. In addition to saving money, you may experience health benefits by avoiding fast food and eating healthier at home.
Save money on bank charges
Conducting normal financial transactions is getting more expensive—if you aren’t keeping an eye on the fees that banks are charging. From late fees to ATM fees to overdraft fees and other charges, you could be wasting hundreds of dollars on fees, money that you could use elsewhere in your budget.
Think about how good it would feel to add even £100 or £200 a year to your savings instead of giving it to your bank or credit card company.
One of the best ways to become aware of fees is to pay attention to the paperwork that you get from your bank, credit union, credit card, the provider of your payroll card if you get paid with one of those, other lenders, and other companies that you do business with.
One of the more difficult aspects of personal finance is figuring out the best way to utilise our money. For the Millennial generation, especially, it’s tough to figure out how to save big on a small budget. But, the key to lessening your spending is to cut back a little in each area, versus taking out big chunks of your budget all at once. It may take a little work in the beginning, but you’ll find your financial stress start to decrease once you’re able to save and pay off more of your debt.
As you work to save more of your hard-earned money, think about what you’ll do with your savings. Will you build up your emergency fund, for example, put it into a down payment savings fund to buy a home or invest it for the future? Having clear goals in mind for your savings can help you stay motivated to continue looking for ways to trim expenses.