According to the Federal Reserve, 47% of Americans can’t get their hands on $400 if they had an emergency. This is incredibly alarming, but it may also be comforting if you’re finding yourself in the same position. You’re not alone. The way you spend money has an enormous impact on your ability to save money.
Money is a complex issue for people. It’s similar to food. Many of us have trouble controlling our eating just as we have trouble controlling our spending. But it really boils down to one simple thing. If you spend less than you make you will save money. If you eat less than you use, you will lose weight. This might be a simple statement, but it is actually much more complex than this for most people. If it was as simple as what I stated above, everyone would be their healthy weight and everyone would have the money they needed.
How to Spend Money Wisely and Save Money Monthly
1. Track your spending
This might be the single best thing you can do to start making changes to your spending habits. Many of us think we know where our money goes, but you’d be surprised how much you are actually spending if you take the time to track everything you spend.
Spend the next 7 days writing down every penny you spend and what you spent it on. Don’t change your spending habits. Just spend as you always would and be very honest with yourself. At the end of the week, give yourself some time to assess your spending. Are there areas you could eliminate or change? Try to make at least one change to your spending and apply that money to your savings instead.
2. Make saving automatic
Whether you have an extra $5 or an extra $200 to save each month, if you don’t set it up automatically, you probably won’t save the money. Your bank makes this super easy. Take the thinking (and decision making) out of saving money.
Set up an automatic transfer from your checking account into a savings account the moment your paycheck gets deposited. You can likely set this up online, but if you’re not sure, go into your bank and they will get you all set up. Don’t skip this. You can start as small as you want, but once you have it set up, you won’t even notice the money is gone. Try increasing the amount in $5-10 increments until you reach the amount you’d like to save each month.
3. Align your spending with your values
If you did the first action step, this will be much easier for you. Aligning your spending with your values means you are spending money on things that align with what you believe, where you want to go, and what helps create the life you want. To do this you need to also eliminate spending on things that don’t bring you any value or bring you closer to where you want to go.
If you did the first action step, look at the spending you do and cross out items that aren’t aligned with your values. For example, do you spend $20 on new clothes each month, but don’t need these clothes for anything that will bring you closer to living the life you want? Could you drop the eating out and instead focus on making healthier meals at home (both saving you money and bringing you closer to a healthier life, if that’s one of your values). If you are doing a lot of spending on things that bring you immediate satisfaction, but don’t ultimately lead you to the life you want, you have a little work to do.
4. Make one change/ low hanging fruit
You don’t have to make drastic changes right away. If it feels too overwhelming, choose one action step to start with. Find a low hanging fruit that you can get done now without too much pain. Making one small change will not only get the ball rolling, but it will also make a bigger difference to your savings than you realize.
Find one thing that you can change without feeling anything negative from making the change. This could be as simple as automatically transferring $5 to your savings every month before you have the chance to spend it. Before moving on, decide on your one small change and make it happen.
You may also want to read:
- 44 Easy Ways to Save Money Now
- How to Make Extra Money Each month | $500 or More
- 9 Ridiculously Simple Fixes to Help You Save Money Every Month
Saving doesn’t have to be scary or overwhelming. It’s the little changes over a long period of time that really make the difference. It’s okay to start small, but don’t make the mistake that most people make and not start at all. Be honest with yourself about your finances and spending habits and then start making the necessary changes to get where you want to go. If you don’t do it, no one else will.