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In today's world, it's easy to spend too much and save too little. Before spending another dime, take a moment to review these practical tips designed to help you get on the right track with spending less and saving more.
"Few of us follow the experts' advice of saving 10 percent of our paycheck each month," says Debbie Wege, BECU Community Relations & Education Manager. "It helps to first know where our money goes. Once you know your spending patterns, you can look for ways to cut costs. Try keeping a spending diary for one month to take a serious look at how and where you spend your money."
How to Keep a Spending Diary:
Based on what you learn about yourself in your spending diary, commit to a plan that will help you curb your spending and produce positive results. Try these tips for limiting impulse shopping and spending less.
One of the best ways to stay on top of your spending is to have clear goals for what you want to accomplish. Be clear with yourself about what you are saving for: know how much you need and by when. By knowing your goals and where you want your money to go, it's easier to keep your impulses in check, because you can weigh those decisions against your "bigger and better" goal.
"If you don't see the money, it's much easier to save it,” says Debbie Wege. "I recommend that people start their savings plan by signing up for automatic payroll deduction. You'll soon find your savings growing without really feeling deprived."
There are a couple rules of thumb to remember when designing your personal savings plan:
A Spending Plan or budget helps you plan how to "spend" your hard-earned money in a way that gives you the biggest benefits in return. Before your think about other bills, think about paying yourself first. A great rule of thumb is to save or invest between 5 and 25 percent of your take-home pay for a combination of emergencies, special needs or wants, or for future retirement.
The other rule of thumb is that housing expenses should be within 30 and 45 percent of your take-home income.
"Credit cards are convenient because you don't have to carry cash, they provide consumer protection, they help us earn good credit ratings, and we get a nice itemized list of our purchases every month," says Wege. "They are nice to have for emergencies, but day-to-day, we should not spend money we don't really have. Remember things bought on credit cost you more over time, so credit should be used wisely and sparingly."
Credit cards can make it tempting to spend on impulse—until your credit is soon stretched beyond a reasonable limit. Try these tips to help avoid living beyond your means and falling into credit card debt:
A card balance of $8,000 at an 18% interest rate would take someone 25 years to pay off with minimum payments, and that would include an additional $15,000 in finance charges over and above the $8,000 in purchases!
After you identify your spending habits and come up with your savings and spending plan, it will take a minimum of a few weeks to change your spending patterns. But don't get discouraged; stick with keeping track of your expenditures—that will keep your spending habits in the forefront of your mind.
"Remember that although budgets have gotten a bad rap, having a clear spending plan puts you in control of your money," says Wege. "Without one, you are subject to things like impulse buys and good marketing techniques. Soon, you can feel like your finances are out of your control."
Following these tips, you can take charge of your life and your future and spend your very hard earned money in a way that benefits you and your family.