Our money does not go as far as it used to and it's getting painful! But what's causing it? Well inflation that's what, there are increasing prices all around and with inflation at an all time high it's only getting worse. A dollar today is not worth as much as a dollar tomorrow!
So what should you be doing? Stop spending money that you don't need to. To do that you need to first work out how much you are spending and then you will see where you can make savings.
Which measns you're going to need to record everything you spend. I know it's boring, but believe me, it's the only way to come up with a plan that you can stick to.
1. Find out what you spend
Take a look at all your bank and credit card spend (on your statements, apps etc.). This will show you what you're spending each month. Write it down somewhere as it's going to be really important (a spreadsheet is ideal, there are also some apps out there, but paper is fine as well). Use some basic categories to help you organize it like food, heating, fuel for car, health insurance, property taxes, online subscriptions, leisure activities etc. It's likely that just the act of finding out what you are spending each month will shock you a bit and show you that you're might be spending more than you thought.
Once it's all documented under your nice categories then go through each expense and label it either 'necessary' or 'nice to have'. Now be strict here, even if you put something down as nice to have it doesn't mean you need to get rid of it, it just means that your brain will be in the right thinking space to see whether you can reduce it.
2. Find quick Wins
Now if you've followed Step 1 you may have already spotted some quick wins. It could be subscriptions for things that you no longer use and hadn't realised you were still paying for. Don't worry if you haven't, just keep looking, there will be some in there somewhere: a streaming service you don't use, magazines that you don't read, gym payments though you haven't been in a year etc. And don't go looking at stuff saying "oh I should use that" that's the opposite of what we're trying to do here remember.
3. Reduce 'nice to haves' spend
Did you get a couple of quick wins (feels good right?). Now go through that list of your nice to have items and be ruthless, could you go without them or can you cut back.
It might be a good time to stop smoking, you'll save a fortune and your health will be better. Do you really need to buy two coffees a day, take one from home in the morning and use the office coffee machine. Ok so it's not as nice, but maybe the middle ground is 3 coffees a week?
Do you really need Netflix, Prime Video, Disney+, Paramount and Hulu? I mean, how many of these streaming services are there anyway!
You look great by the way so do you need to spend so much money on beauty treatments and grooming, are there cheaper alternatives you could use?
Gasoline (petrol) is expensive, are all your trips required or can you cut back on some? If you drive to work can you car share or is there a cheaper public transport alternative.
What about all of those clothes you're buying, do you really need them? Could you reduce the number of purchases or the spend by buying used items (recycled fashion is the future!). Plus stop buying gadgets, they are a fad and always go out of date.
You get the idea, go through each item and question it. You decide what to remove or reduce, it's your money remember. If you have a partner, even better, you can question the spend together and think creatively about ways to cut back. Don't argue though, I'd be upset if I thought I'd caused that.
3. Reduce 'necessary' spend
You should now have a list of money that you can save and should be feeling pretty good about yourself, well done. But and now you must be thinking how can I possibly cut back on the 'must haves'? Well the trick here is not to necessarily remove them (after all you don't think you can), but look at ways that you can reduce the spend. It's a good idea to start with the largest categories of spend first, this is probably going to be your mortgage or your rent. Then car loans, college loans, food etc. Some you will be able to reduce and some you may not. Here are some examples below.
Food is obviously a 'must have', but do you need to buy everything you currently buy or are there cheaper alternatives available. Maybe switch to a cheaper store or think about buying more generic products. Making your own food is cheaper than eating out and making your own food in large quantities often works out cheaper as well. So cook up a large pot and you can freeze multiple meals.
Insurance is a fact of life, you need it for your car, health, house, pet ...... and the list goes on. But are you getting the best deal and/or are you paying for some extras that you don't need. You don't need to look at all your policies now, just focus on the ones expiring in the next few months. Check to see if you are currently paying for any extras that you don't need (cancel those if you can) and as the policies come up for renewal shop around and get the best quote.
As you go through the 'necessary' list try and be as stingy as possible (after all this is how rich people get and stay rich). If you do that then you'll see that maybe you don't need the most expensive Pick Up truck you just need something to get you from A to B and you can save money by trading down (plus it will use less gas/petrol as well so a double saving!). Maybe you can raise the temperature of your aircon by a couple of degrees and lower the temperature that your heating kicks in at.
There are lots of useful little hacks if you look. At the end of the day you will be motivated if you need to save.
4. Sell Stuff
You probably have a lot of stuff in your house you don't use (fitness equipment, golf clubs, kitchen gadgets, bikes, kids old toys) along with many clothes you no longer wear. They are likely to be worth more now than in the future so why not think about selling them?
People seem to buy on Ebay, so what else do you have that no longer has value to you but may have to other people. Have a look, I'm sure they'll be something.
5. Make Savings work hard
If you've followed Steps 1 to 4 then you should have identified some savings you can make monthly. Now you may need those savings just to cover the cost of living in which case you know what they're for. If you are able to put some money away each month as well then great, now you can save it. Put it into a savings account and shop around to ensure you get the best savings interest rate that you can. If you already have some savings, combine them so you get the best savings rate.
Saving for the long term is also important: kids college fees, retirement and things like that. But that's the subject of a different article.
6. Reward Yourself
You've done a good job here so keep focused. BUT you're human and you may lapse. So make sure you have set some money aside to reward yourself for being a Super Motivated Saver. Maybe think about a weekly treat that you deserve, something that shows you the saving was worthwhile. You decide You're the Boss of You.
When you have the saving habit you will want to stick with it, looking for places to cut costs will make you feel good. And you know only spending what you need to and putting your other hard earned cash to work makes sense.
USEFUL LINKS: How the Rich Get Richer, What is Inflation?, Are Central Banks Being Honest, Finance Markets & Savings