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You’ve got a raise!
Now you earn more, and you think it means you’ll be able to finally save up for that trip you’ve been dreaming about. Well, we hate to break this to you, but earning more money doesn’t necessarily mean having more money. Sounds confusing?
If you always spend your whole paycheck and leave nothing for your savings account, a raise only means you’ll have more money to spend.
How do people with lower income manage to save up at least a bit each month? They have good spending habits. If yours aren’t compatible with your financial goals, here’s how to overcome them.
Before you do anything else, take your time to think about your finances and write everything down on a piece of paper. If you have a planner, you can turn one section into a financial planner.
How much do you spend on mortgage or rent, utilities? How much do you spend on food, clothes, going out? Analyze each category and see where you might have some space for cutting down the expenses. Do you eat out too often and then throw out the food from your fridge because it’s way past the expiry date? Have you recently bought a new red sweater even though you already have three similar ones?
Choose at least three categories you want to work on, write down how much you think you really need to spend in each one, and how much you think you can save.
Now that you know what your critical categories are, try to figure out the reasons why you might be overspending.
Are you eating out because you’re away from home most of the time? Prepare your lunch the evening before, pack it, and take it with you when you leave for work in the morning.
Do you go shopping when you’re sad? Find a less expensive way to cheer yourself up, like some physical activity, watching your favorite TV show, or feeding a stray dog.
Do you casually scroll through online shops while you’re waiting in line or you’re bored? Stop yourself from impulsive buying by disconnecting your cards from these shops and finding something else to do when you’re bored – call a friend, read a book, scroll through social media, write down some notes for your next business meeting…
If your goal is to save money for a particular purpose, you need to make it a priority. Don’t rely on having enough money to leave aside at the end of the month, because it probably won’t happen. As soon as you get your paycheck, take a certain amount of money (that won’t affect your budget) and put it into your “savings” envelope.
Even better, depose it to your savings account because this way you’ll be less likely to spend it. When it’s within reach, staring at you from that envelope in your desk drawer, it can be too big of a temptation.
Avoid Triggering Situations
Think about the situations when you spend the money on unnecessary things.
Have you ever bought a T-shirt you didn’t even like that much just because you needed instant consolation? Do you go for a cup of coffee to a shopping center and then accidentally run into a SALES sign?
How do we put this… It’s probably not an accident. You might subconsciously want to buy something, and if this is a cause of unplanned expenses, maybe next time go to a coffee shop that’s nowhere near a shopping center.
Avoid situations that make you spend money. Like showing up too early when you’re meeting someone and then “killing time” wandering around, tempted by all those discounts. Come right on time and you’ll keep the money in your pocket.
Do I Really Need This?
Giving up on everything you like just because it costs money won’t help you break bad spending habits. You’ll manage to control yourself for some time, and then you’ll just explode and spend even more than you would have if you hadn’t ditched that little habit that turned out to be expensive.
It’s the little purchases that empty our wallets. They add up dollar by dollar and we don’t even notice. So, rethink your ritual and try to find an appropriate substitute, a free or at least a cheaper version of that thing that makes you so happy.
Also, it’s quite useful to stop and think for a second before you actually buy something. Ask yourself – do I really need this? Be honest, and if the answer is no, you know what to do. However, make sure there’s some money for your wants in the budget as well, but don’t make it your priority.
Don’t Overuse Credit
Taking out cash loans may be a faster way to get something your paycheck doesn’t cover, but saving for it can be more beneficial for your finances. People tend to forget that, with all the interest taken into account, the loan costs a lot more than the amount of money you actually borrowed.
Take out a loan only if it’s something urgent and extremely important. Using your credit cards, personal loans, and other types of credit can get you into unnecessary debt it’s hard to get out of. We know everything just seems much cheaper when you pay for it in installments or with the money you’ll pay back, but credit isn’t always the answer. Saving gives you more independence and helps you practice being disciplined.
It’s Never as Easy as It Sounds
Budgeting is a highly appreciated and a very useful skill, but self-control is probably even more important when it comes to breaking bad spending habits. But just like your boss rewarded you with a raise, you should reward yourself by spending it wisely.
It isn’t easy to form a habit, let alone to get rid of it, so take baby steps and celebrate little successes. Not by spending money, of course!