Money saving tips

Everyone is always thinking of how to make money online, but hardly anyone thinks about cutting down spending instead. For a change, instead of writing about making money, I thought I’d focus a little on fostering good money habits.

On the outset, it may seem like common sense but really how many of us actually put into practice all the financial advice that we read? Therefore, the very first thing to do is to change your mindset.

1.Change your mindset
The reason why we never change the way we do things is our mindset. You are used to having a certain sum of money to spend and changing that requires some serious change in your thinking.

Take stock of your monthly expenses. List them down in detail and see how many on that list can actually be done without. What are the dispensable expenses?

Be honest with yourself. Which are the things you bought because you saw it on a flashy TV commercial or a glossy brochure, or simply because it was too good deal to pass up on? Do you really need another wrist watch or change your mobile phone because a newer model is available? Is cable TV necessary?

Do you really need to keep up with the Joneses? Ingvar Kamprad, Ikea founder who built his massive wealth from selling low-price Swedish furniture and home goods drives a Volvo that’s nearly 15 years old.

Even if the item is only a hundred dollars, imagine if you cut back a one-hundred-dollar item every month, you save $1,200 a year. Put that into a long-term compound interest savings plan and you are creating tens of thousands of future dollars.

2. Save first, then spend.
When you receive your paycheck, do you spend whatever you want and come the end of the month, save what’s left? Do it the other way around. That is, when you get your paycheck, fix an amount to put into the bank. Preferably, have an account that does not allow easy withdrawal, such as a long-term fixed deposit, or better still, have your salary deposited into an auto-save type of account which automatically transfers a percentage of your salary into an untouchable investment account. Then spend the remainder. How much should you fix to save? That depends on you. It would be easier to start off with a low save/spend percentage such as 20/80 and slowly increase that ratio as you get your spending habits into better shape.

3. Have only 1 or 2 credit cards
Take an inventory count of the number of credit and debit cards you own. If you are very determined to drastically cut your spending, cut up all but 1 of your credit cards. If you need baby steps, cut all but 2 of your credit cards.

Credit card debt is a growing social ill encouraged by credit card companies themselves, what with pre-approvals, easy credit loan, minimum payment and rollover options all designed to get you in debt. A certain credit card company is always reminding you to never leave home without it, I say leave your credit card at home whenever you can and use cash.

Without a credit card, sure you will have to put up with some inconveniences but until you train yourself to cut back on unnecessary spending, paying in cash helps you keep track of how much you spend and forego more costly items, guaranteeing huge cuts in unnecessary spending.

And always pay your credit card bill in full.

4. Plan your purchases
It pays to plan your purchases. Buy only during the sale season and stock up on what you need. Bakeries for example, often have huge discounts pass a certain hour at night before closing to clear their cakes and pastries. Take advantage of that. Shop at wholesale outlets or online shops where prices tend to be lower than normal retail.

5. Give yourself a cooling off period
When you see something you want to buy, give yourself sometime to think about it. Tell yourself to go back next week. Think about how long it would take you to make back the money that you are going to spend buying the item. Is it worth it? Do you really need it? I have done that many times, and the item just doesn’t seem all that necessary anymore, or I just forget about it.

6. Keep yourself busy
The best way to fight temptation is to keep yourself busy, whether by taking up some courses which help you grow your potential, sports, reading useful books or with some fulfilling volunteer work. You have less time to spend window shopping and keep yourself out of shopping malls. Most people go to the malls because they have a lot of free time. Why not spend your time purposefully and save money?

If you combine all these methods and keep at it, I would be really surprised if you don’t see a substantial increase in savings - just by cutting spending. If you can, try and find another person with the same goal to increase savings by cutting spending, and encourage each other. You can even make it a competition to see who saves more. The biggest obstacle is you. Tell yourself, “No more excuses, I’m going to make a change.” and mean it.