Reduce Spending Start Saving
Many people are aware that they need to start reducing their spending and increasing their savings if they wish to accumulate wealth and income in their later years.
If so many people are aware of this, why do so few start to take action from an early age? Imagine how much better off you would be if you took this approach from age 25 instead of in your 40s or 50s.
There are two reasons for this; one is that many people live above their means, with incremental spending and reduced savings on a monthly basis, this is what you would call treading water.The second reason is that people believe it is complicated to save money, so in turn delay their efforts as it appears to hard.
Below are five interesting points that can help you reduce your spending and learn how to make your money last longer, with 5 corresponding questions you should ask yourself.
Reduce your entertainment spending
Odds are you don’t know how much money you spend on entertainment per month, but the stats of Australian consumers would suggest that it may be higher than you think.
Common entertainment splurges are alcoholic drinks, cigarettes, nights out drinking, trips to the cinema, DVD rentals and family activities like bowling and swimming.
All of these quickly add up, especially if you are paying for two (you and your spouse) or four (you, your spouse and two children) people each time. Rather than seeing entertainment spending as a necessity, you must be realistic about the amount you can afford to spend on these things each month.
Question: What can you sacrifice from your entertainment to help your savings?
Reduce your collections of similar items
Take control of your collections – you may or may not be aware of your collections; the things you buy time and time again, despite having similar things already. The obvious cliche collection is the woman with 100 pairs of black stilettos. While this is an extreme example, chances are you have too many of a certain thing already, whether it be handbags, blue jeans, summer jackets, luxurious bubble baths, tea towels or power tools.
Identify what your collections are and assess whether you need all of the items you have already. Sell any you don’t use or pay attention to, and commit not to buy any further of these for six or twelve months. Be aware that when you are around these objects, you will feel a temptation to buy. Don’t give in.
Question: What do you have a collection of?
Watch your food spending
Meals to celebrate someone’s birthday, the weekly grocery shop, the chocolates to cheer you up, the lunch bought each work day, the ice cream while walking the dog, the Starbucks on the way to the office, the takeaway when you’re just too tired to cook. These are a few of the things we face each day in the arena of saving money on food.
Food spending takes up a huge chunk of most people’s income each month. Unless your end goal is to be obese and unhealthy, this is a habit well worth overcoming right away.
Also, a shocking amount of food bought ends up being thrown away and wasted. You are literally throwing away a portion of your income each month by buying food that will not be used.
To get your food spending under control, make sure you plan your meals in advance each week and buy accordingly, never go food shopping while hungry or without a list, and don’t make the mistake of aimlessly wandering up and down every single aisle in the supermarket. Calculate how much your shopping will total and take that amount in cash – do not have a debit or credit card with you. If your shopping exceeds the amount of cash you have, replace some less essential items.
Buy cheaper brands of cleaning products, toilet rolls and alcohol. Arrange alternative celebrations for birthdays and ring a friend when upset – don’t treat food as a reward or comforter.
Question: What food do you find yourself always throwing out?
Cut back on treats and impulse buys
Do you have a gym membership? When was the last time you used it? The majority of people who have a gym membership will actually pay less over the course of a year if they cancel the membership and pay for each gym session as they attend. Cancel your membership now – unless you really go several times every single week.
Consider your magazine and newspaper subscriptions. How many of these can you access free online? How many do you not even get around to reading properly? With the amount of free information available online, there is rarely a need to pay for any magazines or newspapers.
How often do you buy CDs or DVDs? Most CDs can be purchased at a lower price online, and as most DVDs are watched only once, switch to renting them for a fraction of the price.
If you’re wondering how you will manage without these ‘treats’, start thinking about the larger items you can get in the future with your savings, such as a holiday.
Question: What is your silliest treat/purchase each month?
Hide from the ATM
Give yourself a weekly budget and withdraw this amount at the beginning of the week. Then hide your credit and debit cards (or give them to a friend who will not give them back to you until the next week) and force yourself to spend just that amount. This will force you to closely examine your spending and will change the way you think about money and spending. Maybe even consider using the ANZ Money Manager tool online to survey your spending habits.
Question: How much cash do you withdraw each month?
By following these five steps, you will have an extra amount of free cash each month that can be invested or saved how you choose.
We would be very interested to know how you answered the above questions, so feel free to comment below.
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