5 ways to healthy spending habits

Everyone can use a little help with their finances, one way or another.  There is always room for improvement… a way to cut back here or there.  Nothing has a bigger impact on your finances than what you choose to spend your money on.  You’d be surprised what a few simple steps can do to improve your finances.

1.      Budgeting. 

To get a handle on your finances, start with a budget.  The key to budgeting is to be honest with yourself and what you are spending.  Track and enter in your actual spending, not what you want to spend, to ensure your budget is realistic.  

To start you need a budget that is easy to use.  There are free online budgets like Power Wallet or you can use an excel spreadsheet.  List your income in one column and all of your expenses in another column.  Don’t forget expenses like, your morning coffee, dry cleaning, pet care, school lunches, etc.  These small expenses can be overlooked when budgeting.  These expenditures add up quickly and can create a hole in your budget.

Then compare your income to expenses.  Are you spending more than you make?  Are there places you can cut back?  Categorize items that are a “need” (such as rent/mortgage) vs items that are a “want” (such as that morning coffee from the local coffee shop).  See if you can cut out some of those “wants” over time. 

Track your budget to make sure you’re sticking to it.  If you find you aren’t able to follow your budget, it may mean your plan isn’t flexible enough.  It can take revisiting your budget a few times to find the right balance that works for you.  

 2.      Shopping list / meal planning

Meal planning and shopping using a list go hand in hand.  If you don’t think you need to plan or a list, ask yourself:  Do you know how much you are spending on groceries each month?  How much food are you throwing away every week because it went bad before you could use it?  These are 2 very important questions that could save you thousands a year! (And, what would YOU do with an extra couple thousands of dollars every year?) Impulsive spending is one of the worst habits to have. Spontaneous purchases can lead to buyer's remorse and dwindling bank account balances.

To get a handle of what you are spending and to cut down on waste, start with meal planning, then create your shopping list.  First, take inventory of what’s in your pantry, fridge and freezer.  This will likely give you some meals ideas and an opportunity to use up items that may be expiring soon.  Then create your meal list for the week, taking note of what you will use that you already have in stock.  Try browsing online for recipes based on what you already have on hand.

Then, create your shopping list based on your meal plan.  List only items that you’ll need to make your meals and any snacks you’d like.  You’ll be surprised how little you actually need vs. want from week to week.  And you’ll probably end up eating a lot healthier if you stick to your list and meal plans. 

When it’s time to hit the grocery store, have your list in hand.  Do your best to stick to only items on your list and avoid those impulsive buys.  You’ll be amazed at the savings over time. 

3.      Delay purchases.

Purchases often come down to “want” vs. “need”.  Whenever you are shopping, try to think if you actually need the item.  Ask yourself how this purchase will affect your budget?  Is now the right time to be spending on this purchase or are these funds better allocated elsewhere?

Anytime you can delay a purchase, even for something you need, you are saving yourself time and money.  If you can hold off a few months on a new used car, then maybe you can stash away more money for a down payments so your monthly payments are less.  And, the longer you wait to purchase this new car, the later it will be to purchase the car off that.  Over your life time, you can save thousands by putting off purchases until later… or never at all if they aren’t essential items.

 4.      Pay off unsecured debt

A recent study by Bankrate.com shows that 45% of Americans have more credit card debt than they do in savings.   Another study shows that the average credit card debt amount is over $15,000.  Debt is a part of life for a lot of people. Getting control over your debt so you can pay it off is the key to financial freedom. 

When you use a credit card, you are paying with someone else’s money.  Borrowing money on credit cards is expensive because you end up paying interest on top of the purchase price.  And if you are ever late making a payment, additional fees are added.  If you can, stop using your credit cards altogether and pay only with the money you have in your bank account.

If you rely on credit cards to get by, try taking a close look at your budget to see where you can cut back so you can pay for things only with the cash in your bank account. 

If you need help managing and getting out of credit card debt, there are many resources.  Hiring a professional service works for some people, others prefer to manage their debt on their own using allpaydoff.com.

5.      Look for free or reduced alternatives            

Review your budget and consider if there are products or services that you could get for free or a reduced price.  Some examples are: visiting your local library instead of purchasing books, brewing your own coffee at home, reduce your cable TV package and supplementing with services like Hulu or Netflix (basic cable is often less than $15 a month… how much are you paying?), buying gently used children clothes at consignment shops (how long do your kids where the clothes anyways?), and exercise at home and cancel that expensive gym membership.  What else can you find within your budget to reduce or get for free?