toning your expenses
After tracking your expenses for a month, you can see where your money is going and make educated decisions on where to put your cash. Unnecessary expenses such as eating out every night, buying a new purse, or snagging a video game each month could really be eating away at your budget.
Cutting back or completely eliminating these expenses will free up funds you can put toward necessary expenses or saving for a rainy day. Maybe you only buy one new video game every two months. Maybe you "shop your own closet" instead of buying a new outfit. Little changes like this can help you cut expenses and have more money to live a more comfortable lifestyle now and in the future.
Another way to control your spending is to list out those unnecessary items and then start saving a small amount each paycheck toward them. For example, let's say you can't live without that new Prada bag, have to have the latest PS3 game, or you just know a new suit will help you nail yourjob interview. By tracking your expenses you know that you have $100 each paycheck for fun. You can either put all of that money toward one of the items, or split the $100 among the three. Then when you've saved enough for one of your items, it's time to go shopping, cross that item off your list, and start saving for the next.
This helps in two ways. You're not putting yourself into debt by using a credit card and you're not succumbing to an impulse buy so you'll be sure you want what you're buying.
"Most emotional purchases are accompanied by an unhealthy dose of buyer's remorse," says Stephen.
rainy days and emergencies
Another key to staying on easy street is to put money away for emergencies and unexpected expenses. Remember Tim's story? He was able to handle his roommate moving out because he had money saved for an emergency.
There's an old saying to "pay yourself first". One way to do this is to treat saving like a monthly/weekly expense. Include it in your budget like you would a cell phone bill or your rent payment. You could even work with your credit union to automatically take a chunk of your paycheck and put it into savings for you. That way you make saving a habit rather than just waiting to see what you have leftover, if anything at all. And even just $10 a paycheck will get things going... before you know it you'll have a healthy stash ready for an emergency.
now and forever
Living within your means may seem like an easy task. You may even feel like you are doing it right now.
But living within your means isn't just for the present, it also means in the future. By looking at your income and expenses now, you can develop a healthy financial situation for the present and the future.
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