Spend Less & Save More

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.

How to spend less and save more

1. Identify your spending habits.
2. Change your spending habits.
3. Establish a savings plan and establish a spending plan.
4. Avoid credit card debt.
5. Stick with it and be clear about your goals.

1. Identify Your Spending Habits

"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:

• Keep your receipts and record the date, item, and amount of every purchase you make.
• Review your diary to pinpoint areas where you're spending more than you want.
• Identify your patterns. Do you spend lots on impulse items or at expensive restaurants?
• Look for places you can cut costs. Perhaps pack your lunch or carpool to cut back on gas.

2. Change Your Spending Habits

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.

• When you shop, first make a list of what you need and stick to it.
• Shop around for the best prices. Use the paper and the Internet to compare prices before shopping.
• Avoid shopping when you're hungry, tired, or depressed. You'll be less likely to buy without thinking.
• Avoid crowded stores. When stressed, people tend to buy higher-priced items just to "get it over with."
• Distinguish between wants and needs. Get in the habit of asking yourself: Is this purchase necessary?
• Wait 24 hours before making a major purchase. Planning ahead of time helps you avoid impulse buying.

3. Establish a Savings Plan and a Spending Plan

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:

• Try to put aside 10 percent of your paycheck each month.
• Try to use no more than 20 percent of your net income each month to pay off your debts (this does not include housing and living expenses).

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.

• Put some into a high-interest rate accessible account, like a Member Advantage account.
• Put some into an even higher rate, harder to access account like a Money Market.
• Put some into a 401K or IRA for highest rate of return and power of compounding interest over time—especially if your employer matches some of your saving!

The other rule of thumb is that housing expenses should be within 30 and 45 percent of your take-home income.

• For best results, try to keep your other debt expenses like car payments, personal loans or credit cards less than 20 percent of your take-home pay.
• This will leave you between 30 and 45 percent to use for basic living expenses – such as food, clothing, education, personal/household items, transportation costs, utilities, insurance, health care, dependent care, donations or contributions and entertainment.

4. Avoid Credit Card Debt

"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:

• Only have one major credit card and don't carry it with you when you go shopping.
• Purchase only what you know you have cash for and pay off your credit card balance every month.
• If you can't pay off your balance each month, always pay more than the minimum payment.

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!

5. Stick with It and Be Clear about Your Goals

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.

Next steps

If you would like help creating your own personalized budget, please see the BECU Better Budgeting webcast or consider attending one of our free Better Budgeting Seminars in person.