The First Steps to Saving More Money
For a long time, I didn’t know how much money I was spending, or saving, or even making. Now of course I was aware of my yearly salary and I knew when I was spending money, but what I didn’t know is what it all meant in the long term. When I finally came to the realization that there were a lot of unknowns associated with my money, it was pretty stressful.
When I get stressed, my normally carefully hidden OCD kicks into high gear. I went through super organizing my expenses into lists of what I spend, where I spend it, why I spend it, and how much I have left over by the end of the month. I realized that tracking my expenses, coming up with a budget, and spending 10 minutes at the end of the month sorting through my credit card statement to determine where my money goes was actually pretty simple. I even got my husband hooked on doing the same thing so we can track everything and set goals together.
First, let’s look at easy places that your money likes to disappear into so that you know what I’m talking about . . .
One of the easiest places to spend a lot of money is the grocery store. I would go shopping, watch for sales, but not really pay attention to what I was buying, when I was going to eat it, and how many trips to the store I was making. I realized that the more times I put myself in a store, the more I ended up spending at the end of the month. I would sometimes make 15 trips to the grocery store in only one month, and even though some of them would be $5-10 trips, they added up quickly.
The easiest way your money disappears without your realization is through recurring expenses, especially ones that are automatically withdrawn: rent/mortgage, car payments, insurance, cell phones, cable, electricity, etc. I was amazed once I looked at how much I was making and what percentage of it was gone through automatic withdrawals before I even swiped my card.
These easy expenditures definitely don’t make your life easier in the long run though.
Here’s where the stress started and where the OCD kicked in. I did a few things to kickstart my awareness and start saving more.
- The first way to control spending is to just use one credit card to pay for everything, and to pay it completely off every month. The benefits of a credit card are that many have cash back bonuses and you start to build a strong credit score. If you pay it off every month, you get the bonuses without paying the interest.
- Using your credit card and never making a late payment helps you to have a stronger credit score for when you take out a loan for the larger purchases in life. Also, with one card, you can easily sort through your statement and calculate how much you spend on certain parts of your life.
- The second way to save is to set goals. The way I calculated my goal amount was to determine the average amount I spent in the last four months on various categories.
- For example, the average I spent on food from September-December of last year was $375 per month for two of us. I did some research and found that anywhere from $350-500 is the average amount to feed two people. I was toward the bottom of the range so I felt pretty good about my money; however, $375 still seemed like a lot of money. I decided to see what I could do for the next 4 months with $300 as my budget. Surprisingly, I averaged $302 per month. Two months I went over and two months I went under, but this all came down from about $6.70 to $5.39 per person per day. This sounded pretty amazing to me.
- Some categories I had on my budget were: groceries, gas, pets, rent, car payments, car insurance, electricity, and miscellaneous. Some of the categories we decided to divide between myself and my husband so that we could set goals personally.
- Now this third step is where you spend about 10 minutes at the end of each month determining how you did. If you use one credit card like I do, all you have to do is sort through that statement and add up the various categories you have. If you find yourself easily meeting your goal every month, adjust your goal. If you find yourself going over every month, look at what you purchased and start to discriminate between what you need and what you bought on impulse or just because you wanted it.
I was able to increase my savings $722 per month by creating a spreadsheet and being more aware of what I spend and how much I save and how that all relates to what I make.
In the end, I realized that knowing about your spending habits is much, much better and less stressful than not knowing.