I was talking to a good friend recently and she mentioned that she hated yoga. What? I love to practice yoga and strive to do it more. I couldn’t believe it – I thought we had so much in common! It made me realize that while we think we are similar, in fact, we have different habits and tackle situations differently, especially when it comes to our spending. Since I started my business over 8 years ago, tackling our spending is the foundation of how I work with clients. It affects your investing and much more. It does not matter how much you earn – everyone needs some sort of a spending plan. It is like saying you want to live a healthy life and never do any exercise! That would not be realistic. I recognize that we have different styles and practice different habits. Some of us are morning people, some are late-night owls. You get the drift. Here are 3 different ways to spend smarter. Pick one that works for you and move forward!
1) Where did it go? This is a great exercise to see where your money went the last few months. Take out your credit card bills and your bank statements and fill in categories for where you spent your money. Whenever I do this exercise with a client, they are always surprised to see how much they spent on dry-cleaning or the late fees they accrued or even how much they spent at the drugstore. Just examining your expenses can be enough of an eye-opener to spend smarter.
2) Weekly Spending Plan. My clients and seminar attendees know that this is my favorite way to spend smarter. It is the only way I have personally found to consistently keep spending within your means – and still living your life! Come up with a weekly amount to spend on non-fixed expenses. Take the money out once a week – and that is all you are spending for the week on food, taxis, entertainment. It really works. To create your own customized spending plan, check out “My Money Matters” kit or register for SIMPLY MONEY
3) Save to spend. This is ideal for those that have truly unstable income and get paid every few months, or those that have large purchases that seem to throw their budget off whack! My colleague, MP Dunleavey recommends this method. You set up percentages with your money (i.e. 60% for major expenses). You can also set up a percentage for larger purchases (vacation, new winter coat) and actually save that money in a separate ING account every month. When the bill comes up, take it out of that separate savings account.