1. Pay yourself first: This might seem counter intuitive when there are bills coming, groceries to buy, and kids’ needs to be met. However, finding an amount (however much to which you can sustainably commit) and putting it aside for yourself, either every paycheck or every month, will go a long way when trying to tackle money management. Set up a separate bank account or put some cash in a jar, whatever works for you. Even if you only pay yourself $10 every paycheck, or every month, you’ll get to watch that amount grow steadily and you’ll realize that you have more money than you thought; with the added bonus of feeling really great that you’re able to save some money even when times are tight.
Helpful Hint: There is almost always an extra $10. Don’t buy those to-go coffees or that case of beer or those chips, other treats, or unnecessary items. Choose to use that money to pay yourself.
2. Prioritize spending: This is where some planning kicks in. Find yourself a calendar and clearly write down the days and amounts your bills are due. Then, highlight your paydays. Know when your money is coming in and how much of it is going towards the upcoming bills. (Include step 1. in this thought process…remember to take an amount for yourself as well). Set yourself up for success by planning accordingly. Don’t buy groceries and drain your account the day before your car payment comes out. Scrounge if you have to, but make your bills and payments the top priority.
Helpful hint: If you have some leftover money once you’ve accounted for all the expenses, don’t spend it. Just leave it in your account and feel how it feels to have some breathing room. You’ll like the feeling and you’ll want to keep it…more than you’ll want to spend the money.
3. After you’ve paid yourself first, pay your highest interest debt: This goes along with prioritizing as well. Put as much of the money you’ve got dedicated towards paying off debts towards the debt with the highest amount of interest. This will save you tons of money in the long run. Helpful Hint: If you normally only pay the minimum payments on your credit card, try upping the anti and putting more towards the higher interest there and putting a bit less (if necessary) towards any other debts with lower interest. You’ll still be putting money towards all necessary debts but you will get better mileage out of your payments.
4. Have a look at (but don’t obsess over) your bank statement: Sign into your online banking and actually print out a 60 day bank statement (or if you don’t have online banking go to your local branch and get them to print it for you). Being brutally honest with yourself can be greatly motivating. Look at where your money is going. Seeing hard evidence of your 3-times-a-week Starbucks habit or your weekly iTunes purchases can be painful but ultimately impactful. Add up those unnecessary purchases (whatever they may be) and calculate how much money that adds up to over one year. You might be shocked when you see that what you’re spending on treats could instead be making a serious dent in your student loans/mortgage/car payments etc.
Helpful Hint: Don’t use this as an opportunity to beat yourself up. Look at it, and use it as a learning tool. Also, I’ve said to myself countless times, “I’ll just get this one coffee because I deserve a treat,” as a justification for spending money I don’t really have. What I’ve learned is that I also deserve to be financially stable. Start thinking about longer term success instead of the instant gratification.
5. Follow a $5.00 rule when shopping: Grocery shopping can be a heavy hitting expense. Try following a $5 rule at the grocery store: anything that costs more than $5, don’t buy it. Some exceptions apply, but for the most part this is totally do-able. Hit the produce section first and be amazed at how many vegetables you can buy under your $5/item budget. It’s the boxed and pre-made meals that cost the most and they aren’t even healthy for you so, it’s a fringe benefit that you’ll probably become healthier at the same time as saving money.
Helpful Hint: For things that inevitably cost more than $5 wait for the items to go on sale. And for meats, buy the bulk packages and freeze the extra.