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Unusual
Ways Newsletter
(Subscriber Access Only)
(Subscriber Access Only)
I realized that the content of this newsletter hasn't been living up to the name. It does say "To Make And Save Money," after all. I have concentrated more on the the "making" part (although every issue does have a small tip on how to reduce spending). This week I focus on the other half of the money equation.
More specifically, there is a simple exercise that almost everyone should do, and then a few simple habits that you can develop to better control your finances.
Where Does It Go?
If you could figure out exactly how much money you had last month, and how much you have now, and how much income came in during that time, you would know what you have spent. But could you then write down what you spent it on? Most people find that when they try this, they can't account for hundreds of dollars. Where did it go?
A simple exercise will show you where it goes. All it requires is a piece of paper and a pen. For a month or two record everything you spend money on, with the exact amount spent on each item. You may be surprised at how much goes to some areas. For example, a friend of mine did the math and realized that his twice-weekly pizza delivery amounted to almost $2,000 per year.
The idea isn't to make yourself feel bad. If having pizza delivered to your house every week is worth thousands per year to you, and you can afford it, why not continue? The idea is to see what things really cost you, so you can make that decision honestly and openly. You might realize for example, that you would rather spend $2,000 on a trip overseas, or to start a business.
The longer you do the exercise the better the data. A month is a minimum, because you will have paid most of your regular expenses during that time. Also, as you do this, you may find that you spend less as you go along. The process of writing down every penny spent makes you very aware of the money going out, and many people find that because they want to see smaller numbers on that paper, they start to adjust their spending habits.
Categories are a good idea too, although you can do this after the information is gathered. How much do you spend on eating out, for example? How much on groceries? How much at the bar, or on movie rentals? Again, this isn't about making yourself feel guilty, but about bringing it all out in the open, so you can make the choices that make sense for you.
In fact, you can also use this information to find ways to spend less on everything. Start with the big items, like housing costs and car expenses. Look at each item and/or category and ask, "How can I get what i need here for less?" A thermostat that turns the heat down while you are at work and up again just before you arrive home might save you $10 per month. Cheaper car insurance might save you another $15 per month.
Good Money Habits
The exercise above will point out some of your costly financial habits. You can start to control those. But there are some good habits you might want to develop as well. Here are a few to consider.
* Have your paycheck deposited directly into your bank account, so you'll be less likely to spend a big chunk of it on payday. In fact, if you are thinking about payday as different from other days, you may want to work on your budgeting.
* Save windfalls instead of spending them. Put tax refunds, inheritances, onuses and money received as a gift into a savings account of some sort. Use that for major goals, whether that means investing for retirement, starting a business or climbing mountains in Antarctica.
* If you and your spouse work, try to live off of one income and save the other for major goals. If you are already living off one income and your spouse gets a job, this should be possible.
* Regularly look for ways to cut expenses. Every time you pull out your credit card or checkbook or cash, think, "Do I really need this?" If you are going to the gym only once a week, for example, maybe you should drop the membership and exercise at home.
* Round up when recording your items paid by check. After a few months of doing this, you'll have more money in the account than your balance shows. Transfer that extra to savings.
* Always apply "extra" money to your debts. If every time you have some overtime pay or a bonus or a tax refund, you use that money to pay off credit card debt, you'll get out of debt sooner and spend a lot less on interest charges. This is a great habit to develop.
http://www.99reports.com/ways-to-save-money.html
Note: This is part of the "Unusual Ways"
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