Fall has officially kicked off, school has started and for many, it is time to put the nose to the grindstone at work. The next few months are the perfect time to reset your wallet and focus on the long-term financial goals that you want ahead of the holiday season, when restraint and moderation tend to disappear.
I believe the best personal finance tips are the ones that are habit forming. Saving a few dollars a day because I brown-bagged my lunch is a lot easier than skipping out on a weekend’s worth of activities. In honor of this sentiment, today’s advice will focus on better spending habits. Tomorrow’s post will highlight general ideas on growing side-businesses, why it is important to stay in school and saving for retirement.
In honor of this new leaf, here are some personal finance habits to set you up for success this season, and into the future.
“The biggest piece of advice is that old adage of ‘save early and save often.’ We all know we are supposed to do it, it’s like drinking water and yet it is so hard for people to do,” says Abby McCloskey, an economist who previously was the program director of economic policy at the American Enterprise Institute, focusing on financial institutions and social mobility. “I find it is easier to do if I have a general rule of budgeting to follow. If you set aside $100, $200 a month and get into a routine of doing it, that, with compound interest will turn into something beyond what it actually is.”
Personal finance blogger LaTisha Styles takes it one step further and recommends setting up a monthly automatic transfer from your checking account into your savings.
“It makes savings automatic and turns it into a habit,” says LaTisha, whose site Young Finances has many saving tips. She suggests starting off with a 10% transfer and then trying to increase it to 20%. The millennial slowly worked her way up until she was saving 50% of each paycheck every month.
This all sounds great but if you are living paycheck to paycheck, putting aside savings every month may seem like a stretch. Don’t be discouraged. Take a look at where your dollars are going, and chances are you can save some moolah.
“One of the most important things we ever did was start tracking our spending and income. I know so many people who make plenty of money and pay the bills and everything is fine but they really don’t know how much they are paying for different categories like eating out, groceries, utilities, hobbies,” says Holly Johnson, the frugal blogger behind Club Thrifty. When she and her husband began tracking their spending, they were shocked to find out that they were spending over $1,000 a month on groceries for themselves and their baby.
Tracking your spending does not necessarily require a notebook and pen. Apps like Mint, Level Money or CashTrails can make it easier. Be warned however, using budgeting apps will require you to share banking details. For more suggestions for money-saving apps, look here.
If you don’t have a smartphone or don’t want to trust your personal information to an app, try using your credit card for all your expenditures for a month. That way, you can look over your transactions and see how much was spent on each category after the fact. Or, there is always the tried-and-true method of budgeting with an Excel spreadsheet.
“If you don’t take the initiative to do it, you won’t. People always say, oh that is a good idea, I should save $100. But you have to do it,” says Johnson.
“People focus so much on getting a raise but if people look at themselves and see where they are spending, they could be wasting $500 a month. That is a $500 raise if you can reduce your spending,” says Johnson. “Recurring expenses, no matter what they are, add up. Gym memberships, magazine subscriptions, are you getting your hair and nails done twice a month? Can you renegotiate your internet? Can you take on a roommate? All those little things add up.”
The frugal blogger Johnson advises to “live the poor student life as long as you can,” since once you start buying nice things, it can be harder to save.
Look for little ways to dial back your spending. The key is to focus on small things you can do, so that you don’t have to feel like you can’t spend at all. That “pent up demand” can lead to splurges that will break your budget. Take a look at your finances and see which expenditures are important to you.
Don’t like the idea of giving up your morning latte? Try having a no-spend Saturday instead, an idea Styles recommends on her blog. Love the idea of happy hour with co-workers but hate the big bill at the end? Commit to getting only one drink, as the Broke Millennial Erin Lowry recommends on her blog. Enjoy eating food with friends but tired of leaving a chunk of your paycheck on the table at restaurants? Host a potluck at your house, supply the main dish and ask everyone to bring a beverage or side of their choice. It is all about getting creative in the ways to save.
“Live your own life and decide what is important to you. Prioritize and decide what really matters to you, don’t try to keep up with other people because a lot of times it isn’t anything that looks like what it is,” says Johnson. “Even if your friends look like they have it all, they have a fancy car, a nice house and go on vacations all the time, you have no idea what other people’s financial picture looks like. They might be close to bankruptcy or deep in credit card debt.”
By Alexandra Talty via Forbes