Three ways to spend less
Readers talk back
Must reads site wide
IWD more than just a cover story, Is this the year of the female founders? Fear is the root of all your problems: What we read
Building wealth is fundamentally quite simple. But many of us feel the opposite and expect we need a complex solution, or a risky quick-fix, to achieve our goals. My philosophy is that if we can all do a few basic things consistently, we will ultimately create financial freedom for ourselves. It's not rocket science!
The very first thing we must do to build wealth is to spend less than we earn. It's oh so simple, yet so many Australians are in fact spending more than they earn and living on credit of some form.
Here are three simple things you can implement today in order to reduce your spending right away:
- Pay yourself first
Usually, when we receive our salary, the first thing that gets paid is our rent or mortgage, followed by bills, groceries and other living expenses. The chances are at the end of the week or month there is nothing left at all for savings once everything else has been covered. Avoid this situation by establishing an automatic transfer into a savings account or investment immediately following your payday. The rest is yours to spend on all of the above. By "paying yourself first" you've made sure that you've put away a little of what you earn each and every week.
- Complete a budget
Budgets are for poor people, right? Wrong. All of the wealthiest people I've worked with live by a budget of some form. They know where they spend their money. Completing a budget means facing where you're spending your money and bringing your awareness and attention to it. Anything we focus on, we can improve, so the simple act of spending 15 minutes to create a budget will encourage you to spend less over time as you come to realise how much certain things are costing you.
- Use cash for weekly spending
Once you've completed a budget, you'll be able to come up with a rough figure of what you need in terms of weekly expenses – things like groceries, dining out, socialising and getting around. If you take this amount out of your bank account in cash, knowing that this is all you have until the following week, you are far less likely to overspend. Knowing what you have in your wallet and watching it dwindle away throughout the week will bring the consciousness back into your spending behaviour.
If you'd prefer not to use cash, use a simple weekly budget app (there are plenty available) or a small diary to record your purchases each week to ensure you stick to your allocated amount. It might sound like a lot of extra work, but if it means the difference between reaching your goals and not, I'd spend a few minutes each week doing it.
Just remember: wealth creation is not rocket science and anyone can achieve it. Think simple, think slow and steady, think consistency and you're well on your way.
Build it slowly.
Disclaimer: Please note this article is of a general nature and should be used for informational and educational interest purposes only. Please seek professional advice before making any decisions in relation to your own personal circumstances.