January is a time of reflection and growth for many people.
Now that the holiday season is over, and we’re all getting back to our regular lives, many of us are thinking about how we can make positive changes for the year ahead. Some of the most common resolutions revolve around health, weight and financial independence.
While we might not be able to help you drop a dress size, we can help you to trim your budget and adopt some savvier spending habits this year. If you’re ready to boost your financial health and make sure that you have what it takes to reach your cash-based goals by 2020, start with these simple tips.
1. Remove Anything Unnecessary from the Budget
The easiest way to start trimming the fat on your budget, is to look at the places where you can alter your spending easily. For the most part, this simply means clarifying the difference between the things that you “want” and the things that you need.
For instance, you might need a car to get you to and from your job, but you don’t necessarily need the latest model to hit the market this year. At the same time, just because you need a smartphone to stay connected, doesn’t mean you need to pay through the nose for the new iPhone.
2. Compromise on Purchases
Sometimes, improving your spending habits doesn’t have to mean giving up the things that you want or enjoy. Instead, it’s about compromising on your purchases, or looking for new ways to do things.
Remember, there may be parts of your budget that you can eliminate that you never thought about. For instance, if you want to reduce your weight this year, don’t spend £50 a month on a gym membership, try getting your friends to join you for a run every couple of days. If you like watching movies with the family on an evening, don’t pay extra for a movies channel. Look into a streaming service instead – there’s bound to be plenty of things that you want to watch, and you’ll spend half as much.
3. Cut Down in One Major Area at a Time
In an ideal world, you’d be able to cut down on all of your bad spending habits at once and see a phenomenal change to your bank account within a week or two. Unfortunately, the more you push yourself to change in a short amount of time, the more likely it is that you’ll fall back into bad habits. Remember that big results are going to take time. With that in mind, choose one problem area to address at a time.
For instance, if you know that eating fast food at lunch every day is costing you a fortune and wreaking havoc with your waistline, start taking packed lunches with you to work 3 times a week instead. That way you can ease into a new routine.
4. Be Smart with Major Expenses
There are expenses in your life that won’t fall into your standard weekly or monthly bills. For instance, you might pay for your car insurance once a year, and your water bills every 6 months. Make sure that you take those major expenses into account when you’re planning your budget for the long term. You may need to save aside a small portion of your income each month so that you’re not caught by surprise when you suddenly receive a bill in the mail.
Remember, one-off expenses aren’t the other major costs that you need to be careful with. There are also times in your life that you may decide that the best way forward is to apply for a loan. When that happens, it’s crucial to ensure that you’re getting the best deal. Don’t rush into something because you’re eager to get your hands on some extra money, as you could end up paying extra for your interest.
5. Have a Savings Strategy
Finally, we all know that if we want to be financially independent, then we need to learn how to spend less than we earn. The less you can spend on a monthly basis, the more money you’ll have left over to put into your savings account. Though it’s tempting to spend any of the money that you have left at the end of each month on the things that you want, remember that a savings account will help you to accomplish your long-term goals, and reduce your chance of financial hardships in the future.
Consider rewarding your good spending habits with a small treat at the end of each month, and putting the rest of your remaining cash into your savings account.