Many people struggle with learning and practicing ways to save money for the future and struggle to spend their money wisely as well. It can feel like an uphill battle when you are constantly spending more money than intended and never having enough of your paycheck to put aside for those unexpected emergencies that crop up in your day-to-day life. Most things in life have a cost attached to them and it can feel overwhelming.
Most people, especially those who earn a low income, when they first try to put aside money get overwhelmed looking at their finances. The constant worry over money and paying your bills on time make it so that looking at your bank account is a terrifying experience. Eventually, you just stop looking and pretend your money troubles don’t exist and that is a huge mistake. It makes much more sense to know what you are bringing in and what you are spending and ways to cut back, eliminate your debt, and plan for the future.
With a little financial knowledge, you can not only spend your money more wisely, but you can also start saving, even if there are necessities that need paying for, like those bills that you need to pay monthly.
Below are 20 tips that will help you spend your hard earned money more wisely and help you start to save, no matter your income or if you haven’t been able to save before.
Tips for Smart Spending
Learning how to spend your money wisely is important once you start having a steady income. More often than not, people don’t really understand the importance of having and keeping to a budget, which can lead to disastrous consequences. Saving money is only one half of the puzzle. Learning how to spend it smartly is the other half. When you spend your money in smart ways, it causes you to spend less of it and save some money overall as well. Knowing how to spend it, on what purchases, and making better choices is essential for smart spending and keeping more of your money in your pocket. Below are ten ideas for how to spend you money wisely.
- Prioritizing your purchases
Chances are, you don’t have enough income to buy all that you need and want at the same time. You can probably only afford one or two things. Setting spending priorities simply means focusing on what is important to you rather than buying everything on your list. This may mean that you cannot spend any money on leisure activities because you have to pay all your bills. It might also mean only buying a pair of shoes and not the dress and necklace along with it.
- Patience is a spending virtue
Sometimes life happens and you have to buy an item immediately, like in the case of unexpected car repairs. However, where possible you should hold off on buying an item. “That way you can wait for discounts, any special sales coming up, like Black Friday, or wait until it’s in less demand, which lowers the price. Doing this when you can, helps keep you from overspending on items and saves a ton of money in long run,” says Barbara Jackson, a writer at Academized.
- Define your long-term spending goals
Having long-term spending goals makes it so much easier to know when a purchase is worth it or not. You can weigh each decision against your goals and decide on a case-by-case basis whether you can go ahead with the purchase or not. If the purchase will drive you further along toward reaching your long-term goals, then it is worth going ahead and buying the item or service you need. This can also help you save money as well, as it can make it easier for you to put money aside every month.
- Pay down your debts
This is a common piece of advice and it’s a really good one to bear in mind. If you have credit card debt, outstanding loans, anything that you need to pay back, then you need to make payments on and free yourself of all of your debt. Debt includes not only the original cost, but the interest you will pay in the future, as well as lost interest from investments. Debt is burden and can be costly even if your interest rates are good.
To avoid any debt, pay with case wherever possible instead of financing or buy-now-pay-later schemes. Sometimes, it’s good to use credit cards, as many have cashback or loyalty point schemes that make using them a good option. However, make sure that you can pay it off in full before the interest is due.
- Living below your means
Just because you make a six-figure salary doesn’t mean you have to live that lifestyle. Consistently spending less than you earn is a smart spending tip that helps you save money in the long-term. The money you don’t spend goes into savings or your investment account. A wonderful way to ensure this is to do this at the beginning of the month, before you can even think about spending it.
- Make a realistic budget you will want to keep
Budgeting is essential for spending your money wisely, as well as saving it. The trick is to make sure it’s realistic so you can stick it out, month in and month out, and feel good about it. Budgets help you become more aware of your spending habits, keep on top of paying all of your bills on time, and build your savings.
A budget is the basis of understanding personal finance and is a must-have essential skill that everyone needs to learn. It prevents overspending and being broke and in debt, should anything go terribly wrong in your life, like being made redundant during a global pandemic. Your budget is your ticket to a fully-funded emergency fund.
You can learn how to make a budget through your local bank and there are also many apps and computer programs that can help you automate the budgeting process, which can save you time and stress.
- Borrow and reuse as often as possible.
Why pay for things when you can get by with borrowing them or reusing them? Borrowing things like hammers and screwdrivers, or even tents and sugar. If you will not use it often, it’s worth asking your family, neighbour, or friend. Reusing items is also important. Reuse empty bottles as water bottles saves you buying bottled water. Save your plastic takeaway container and use them as leftover containers, instead of buying Tupperware. These are just some examples of ways to reuse items, so you spend less on unnecessary purchases.
- Have an emergency and sink funds to help you out
When you have emergency and sinking funds, you protect yourself from spending more than you can afford and you can spend the money guilt and worry-free because you can actually afford it.
An emergency fund is savings pot that you have set aside to cover unexpected expenses, like car breakdowns and unexpected trips to the hospital. It’s important to note that this pot should only cover unforeseeable expenses, which comes up as a total surprise.
A sinking fund is a pot of savings which covers a specific expense. So, for example, you might wish to purchase an expensive birthday gift for your partner. Instead of waiting until the last minute, you put aside some money each week into a separate savings account until you have enough and then buy the gift. Or putting money aside each month to cover the cost of your vehicle inspection. It’s money that is set aside for one known future expense.
- Get your partner onboard with your financial plans
If you have a partner, getting them on board with your future spending and saving plans is a good idea. Working as a team is always the best option. You can sit down and discuss each purchase and if there were better, cheaper options available for purchase.
You can also make up for each other’s flaws. Say you tend to be an emotional spender and your partner tends to be more rational. Their spending habits may influence you to become more disciplined in your spending over time. If you are good with numbers, while your partner is bad with them, then maybe you can be the one setting up the spreadsheets and doing the calculations.
- Skip café coffees and eating out
Two of the biggest ways to waste money are eating out all the time and going and buying coffee in coffee shops. People spend a lot of money buying coffee or tea on the go and eating out. Making your morning cup of coffee at home and packing a lunch, rather than buying out are great ways to reduce your spending.
Meal prepping for the week saves time on cooking and makes it a lot easier to avoid takeaways, which are more expensive and tend to be less healthy.
This isn’t to say that you have never buy a Starbuck’s latte or late night Chinese takeaway, just limit how often you do these things. If you really love visiting your morning coffeeshop, then make that a priority, and find alternative ways to skim your spending,
Tips for Smart Savings
Now that we know how to spend our money more wisely, let’s take a look at how we can be smarter about saving money. It’s important to put money aside out of your paycheck. This is how you cover emergency expenses, unforeseen job loss, and plan for your retirement.
The recommended amount you should be putting aside is about 10-15% of your income. Over time, this adds up and creates a great cushion for you and your family. However, a lot of people struggle putting aside money every month. It feels overwhelming and impossible, especially if you have debt and a low-income. Others just don’t know where to even begin.
If you have never tried saving before, or find it overwhelming and too hard to begin, then here are 10 great tips to help you start saving without feeling overwhelmed, confused, and a personal finance failure.
- Record all expenses
Before you can even think of making a budget and putting money aside for savings, you need to know exactly what your spending habits are and the exact monetary amount you are spending. That means, you need to record every single expense for a month. This means every tip you give, every pumpkin spice latte you buy, everything. Once you know all that, start categorising the spending. Break the spending down into gas, bills, groceries and mortgage or rent. Look at your past bank statements or credit card bills to ensure total accuracy.
If you struggle with doing this manually, there are plenty of computer programs and apps that you can use and automate the process, which might be a better option.
- Your budget should include a savings category
When you make a budget, do you include a category for savings? If you are not, then you absolutely should be. Building up your savings needs to be a priority, or chances are you won’t actually do it. Including a savings category in your budget prioritises putting some of your money aside and intentionally building your savings. As previously mentioned, your savings should be around 10-15% of your income. This will help you start to think more often about saving money.
- Pay down your debts-Yes, it’s worth mentioning twice!
This tip is so important that it was worth mentioning again but focus on how it affects your ability to save money. If you have debt, then you cannot save effectively because all of your money is going to pay off the debt. The less money you have in savings, the more disastrous things like a car accident or leaky pipe can be for you. Getting rid of your debt is essential for saving money.
It’s recommended to pay down all significant debts, and only put aside little bits of money in your savings. Once you pay these off, then you can start paying any other small debts and it might be ok to increase the amount you are saving slowly. The priority should be to get out of debt as quickly as you can.
- Cancel automatic subscriptions and memberships
Subscriptions and memberships are great, but not if you don’t use them. Then they are wasting money that could be going into your emergency fund or just your savings. It’s really important to periodically evaluate which subscriptions and memberships you are using all the time and which ones you are not.
Once you know which ones you are not using, then be sure to cancel them and plan what you will do with the extra money you have saved. Be sure to check your bank statements the following month, as sometimes they do not cancel properly and chase those up and get a refund if necessary.
- Use automatic savings programs and apps
Sometimes, people are not good at remembering to take a bit out of their earnings and set it aside every month, due to many reasons. Sometimes it’s being too busy with work and family life, other times it just being plain old forgetful. Whatever the reason, if this keeps happening, then it might be worth looking at using a savings app, which will automatically do the saving for you.
There are many different apps available, most have options that will let you automate a set amount to be taken out of your account on a pre-arranged basis. It’s a fantastic way to build up your savings while saving you time and not having to think and remember to do it manually.
- Use cashback apps and coupons
Using coupons to save you money is still a viable option today. Nothing feels better than using a 50% off coupon to buy that much needed item that you have been eyeing for months.
There are also apps out there that will give you cashback when you purchase certain items, even give you money back on your weekly grocery shopping.
You can use the money to buy yourself an extra treat Or why not stick the savings directly into your savings account.
- Spend your bonuses and unexpected income wisely
There is always a temptation to go on a spending spree when you get that nice Christmas bonus check, but there might be better ways to use that money. If you get a nice bonus or unexpected inheritance, consider what your options are before you spend it all.
If you have debt, then paying down your debts is much better use of that money. If you are debt-free, then consider putting it all in your emergency fund or a sinking fund or both. Always think about the future when you get extra money and be sure you are making the best decision before spending it all.
- Reduce energy costs
Reducing how much you spend on your utilities in your home is another excellent way to save money. It’s really simple to cut costs on your electricity bill, for example by installing dimmer switches and LED lightbulbs, which reduce the amount of electricity you are using. Other ways to save some money include taking shorter showers, making sure all your pipes are in good working order, even buying more energy efficient appliances can help save you money, even though they are expensive. By saving up over time, you can reduce the upfront cost and make those improvements over time.
- Utilise a spending freeze
If you really need to cut back on your spending, why not try a spending freeze. This is where you don’t buy any non-essential items for a specified period of time. It can be one day or an entire month, it’s completely up to you.
To help you stick to your spending freeze, do things like prepping meals with food items that you already have in the house. This will help you avoid stores where impulse buying is a major concern and help you say ‘no’ to anything that isn’t a basic need.
- Set savings goals
If it’s a great idea to set spending goals, then it’s a great idea to set savings goals as well. Your savings goal should be specific but realistic. If you are only working part-time, then trying to save $10,000 by the end of the year is unattainable and you will not stick to your goal. Saving $1000 might be a much more achievable goal in this case. Using a savings calculator will help you figure out how much money you will have to set aside each month. This will help you decide if your goal is practical and realistic.
Goals help you stay on track and give you a feel good boost when you achieve them. Attaching and reaching a savings goal can give you a much needed happiness boost when it comes to conquering your personal finances. This confidence boost can lead to setting and achieving more savings goals in the future, helping you grow your savings.
Takeaways on smart spending and saving
Smart spending and saving work together to help you make better spending choices and save you money that you can use for the future. Understanding the basics of personal financing, like making and sticking to a budget, is an essential skill that all adults need to know how to do. There are many resources available to help you learn how to make better financial decisions for your future.
Spending your money wisely requires understanding your spending habits and long term spending goals and prioritising them, so you spend money on the right things.
Saving money requires including it in your budget, making clear goals, and utilising your smart spending habits to help build and grow your future savings.