According to one report, more than half (54%) of Canadians say they struggle to keep up with the daily cost of living, and couldn’t manage an unexpected $1,000 expense if it arose. When you know how to spend money wisely, it becomes easier to manage your income and expenses. The key is to understand your spending habits, work to adjust them, and learn how to save effectively.
Not sure where to start? Today, we’re sharing how to achieve smart spending habits, even in today’s economy.
1. Track Your Spending
If you want to spend more responsibly, the first step is to fully understand your habits. Are you spending blindly on unexpected items, such as trips to the movies and overpriced coffees? Or, is all of your money going toward basic necessities, like rent and utilities?
For most of us, the answer is somewhere in between. We might have a few splurges here and there, but we’re relatively responsible with the money we make. At least, that’s what we think.
If you commit to tracking your spending for a month, you might be surprised to find just how much money you’re throwing away on non-essentials. While it’s nice to treat yourself every now and then, even seemingly small purchases can add up. Before you can change the way you spend, you need to know where you currently stand, so don’t skip this step.
2. Lower Your Monthly Expenses
Once you’ve tracked your expenditures, take a close look at the list. Then, cut any expenses that you don’t need. This might include:
- Monthly subscriptions and memberships
- Excessive phone and internet plans
- Splurges on entertainment, groceries, and gifts
Spending wisely starts with controlling your impulses to pay for something because you simply need it at the moment. If you can lower the amount you’re paying for streaming services, or that top-tier gym membership, that’s money directly back in your pocket.
3. Pay Down Your Debt
If you’re stuck in a cycle of debt, the concept of saving money can seem completely out of reach. However, this goal isn’t impossible. There are multiple debt repayment strategies that can help you reduce the amount you owe over time and lessen that financial burden.
The most effective way to begin is to make your payments on time each month. Not only does skipping a payment mean paying more interest, but it can also affect your credit score. Payment history comprises 35% of your score, and late payments can remain on your report for up to seven years.
4. Limit Your Credit Cards
Ideally, you would put your credit cards away while you focused on getting your spending back on track. While the cards themselves aren’t inherently bad and can actually teach you how to spend responsibly, they can also exacerbate the debt cycle and encourage overspending if you aren’t careful.
If you’ve grown accustomed to swiping your card every time you get groceries or pay for gas, take a look at your recent statements. When you pay your balance off in full each month, it’s essentially the same as using cash. However, it’s easy to get into the habit of only paying the bare minimum.
Doing so can lead to higher interest charges, making it even more difficult to get back on your feet. If you must use your card while you’re trying to spend more responsibly, make sure to only do so if you know you can pay the amount back completely at the end of the month.
5. Make a Budget
We get it: Creating a budget can be tedious. However, it’s an important part of learning how to spend money wisely.
While there are many different budgeting tips and guides you can follow, the basic premise is relatively simple. With a traditional budget, you’ll assign a pre-determined portion of your income to a specific expense, such as groceries or housing.
Once you’ve covered all of those expenses, any leftover income will go toward your savings. Creating a budget is an important part of establishing a greater financial roadmap for your future. You can learn how to get started in our recent guide!
6. Establish an Emergency Fund
If you were hit with an unexpected expense, such as a car repair or a medical bill, would you be able to cover it? If you’re shaking your head no, then it’s time to reassess your spending habits.
When you create an emergency fund, you can confidently build your savings. To get there, start by creating a separate savings account that will allow you to earn interest on the money you save. Then, every time you get paid, transfer a set amount of money to that account.
You can start by just adding $20. Over time, you may be able to increase that amount to $50 or even $100. The goal is to make consistent contributions and grow your emergency fund steadily. In the meantime, if you need quick cash to cover an emergency expense, you can always look into an online loan!
7. Start Thinking About Retirement
Depending on your age, planning for retirement might sound a little premature. However, the reality is that it’s never too early to start saving for your golden years.
If you work for a company that offers an employer-sponsored 401(k) or Roth 401(k), take advantage of that program. This allows you to save a portion of the income you earn and set it aside for your retirement. If you’re self-employed, you can speak to a financial advisor about setting up an individual retirement account (IRA).
Long-term investment strategies like this can help you save money, budget wisely, and avoid surprise expenses down the road.
Discover How to Spend Money Wisely
Whether you’re financially stable or struggling to get out of debt, it’s important to know how to spend money wisely. If you can be a smart steward of the money at your fingertips, you’re less likely to fall into unhealthy habits that could drain your savings and investments.
At Easternloans, we’re here to help you avoid a financial crisis as you navigate these next steps. Our online loan application is quick and easy to complete, giving you access to the money you need, when you need it. To learn more, apply today and let’s connect!