Are you feeling the aftermath of a spending binge? Credit card bills and bank statements arrive and suddenly, you feel bloated. You resolve to cut some of the fat from your budget. These five steps could help you go on a spending diet to improve your financial health:
1. Count the “calories.” Before you can trim expenses, you need to know where they are coming from. Documenting every single item can be tedious and nerve-wracking. For many people, a better option is to make a list, based on your statements, that provides a ballpark estimate. Then you can determine what percentage of income goes toward needs, such as housing and food costs, and what is discretionary. Aim to save at least 20% by cutting back on the wants.
2. Focus on the “meat and potatoes.” Don’t ignore the fixed costs—your mortgage, car loans, and insurance premiums. Look for ways you can spend less on these items. For instance, it might make sense to refinance the mortgage and shop for less expensive auto insurance. Similarly, you might be able to reduce commuting costs by carpooling or switching to mass transportation.
3. Make it a daily regimen. It isn’t wise to starve yourself one day and splurge the next, a savings diet requires a regular routine. Consider cutting your daily spending by an average of $3 or $4. That could add up to more than $100 a month, and over $1,200 a year! Small changes can make a big impact.
4. Allow yourself to cheat (carefully). Even if you’re watching your spending waistline, you don’t have to be good all the time. If you enjoy some small luxuries—going to the movies, say, or getting a manicure—you’re entitled to treat yourself. But watch out for wasteful spending on upgrades that are too expensive.
5. Try an all-cash diet for a week. When you put away your credit and debit cards, you may find that you’re less likely to spend frivolously. This also helps you to pay more attention to how and what you’re spending, and to prioritize your preferences.
For more information, visit our website at www.makinglifecount.com or contact KHC President Matt Starkey at email@example.com or (913) 345-1881.
Photo credit: Alan Cleaver / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)