10 Tips to Spend Money Wisely
We all want to be wise with our money, right? Sounds good in theory, but how do you actually put it into practice? Let’s take action today. These quick, little improvements can have a big impact over time.
I’ve used better spending habits to help me go from a zero net worth to having over a million saved. Let’s improve your spending today with these ten tips on how to spend money wisely:
1. Make a list of what you value.
The best way to spend more wisely is to align your spending with your values.
Are you even aware of your personal values?
Take a moment to write down the things that are most important to you in life. Is it security for your family? Is it success in business? Is it helping others?
Like me (see my values), you likely have a combination of values.
Write these values down and then ask yourself this question: “am I spending my money on things I value?”
Then, ask “am I spending my money on things that aren’t in my value system?”
Doing this little exercise will give you some clarity and help to guide you into thinking consciously about your spending.
2. Make a list of things you really enjoy.
Along the same lines as #1, you should be using your money to bring joy to your life. You define what “joy” is. Go ahead and write that down.
What brings you happiness? Identify those things and then ask yourself if you are spending your money in those areas. More importantly, ask yourself why you are spending on things that aren’t on that list.
Bottom line: avoid spending too much money on things that aren’t at the top of your “joy” list.
Related: It’s Okay to Spend Your Money on Things You Really Want
3. Make a list of places, things, or people that cause you to make poor spending choices.
Can you identify the triggers to poor spending in your life?
Think about your spending over the past couple of weeks.
- When did you make the worst decisions (i.e., spending money you didn’t have, spending on things you don’t value, etc.)?
- What was the cause of your poor choice?
If you can identify these weak points, then you can begin to live your life in a way that helps to avoid some of these spending hot spots.
4. Review your regular spending for things to eliminate.
When was the last time you wrote down your list of monthly bills? Take a moment to do a thorough spending review now.
List out all of your required spending for the month. This includes rent or mortgage, insurance, debt payments, utilities, services, etc.
Is there anything on that list that you don’t need or want?
It sounds absurd to ask such a question. However, I’ll be the first to admit that in the past, there were things on my list of monthly expenses that I didn’t need or want anymore.
Odds are you have one or two yourself. If you find something to eliminate, do it. There are several negotiation apps can help you identify expenses you may be able to eliminate.
5. Review your regular spending to identify things to reduce.
Next, take a second look at that list of monthly bills and see if there is a way to reduce the cost of any of them.
- Could you call the provider and ask for a better rate?
- Could you call a competing provider to see if you can reduce your rates by switching?
If it’s a debt, could you do a balance transfer or consolidation that would help you reduce your rates and eliminate debt more quickly?
6. Create a budget.
On a basic level, a budget is simply a plan for your money. If you know your expected income next month, write that number down. Then start applying that money to different things.
Start with taxes (if it isn’t already taken out), giving, and savings. Then move to basic necessities: housing, food, insurance, utilities, and transportation. Finally, apply the rest of your income to other things you need or want.
Open up an account with an online budgeting tool like Mint.com to streamline this process.
7. Start writing down each purchase you make.
Tracking brings awareness to any situation. Use your iPhone or another device to take spending notes throughout the day. There are Apps for that I’m sure.
Or simply carry around an old-school pad and pen to jot down your spending. Do this for a week and see if your spending improves.
Related: Use These Psychological Tricks to Spend Money Wisely
8. Switch to only cash.
If you have a severe problem with credit spending, this is the way to go. Some folks swear by this method even if they don’t necessarily have trouble with credit cards.
Like tracking your spending, going to a cash-only system, if only for a week, will bring a heightened consciousness level to your spending.
9. Implement a “sleep on it” rule.
Decide today that for any purchase over X amount, you will “sleep on it.” It could be one night, a week, thirty days, whatever.
Just allow some breathing room between your desire and your decision to buy. Obviously, this gives you time to evaluate the purchase against your values and your budget.
10. Put future spending on a calendar.
Pull out a calendar and look at your upcoming events and life changes. Will spending be necessary? Is so, then make a note of that and start building a list of future spending requirements.
This is somewhat different from a monthly budget because it looks a bit further out. This does two things: (1) it allows you to prepare by saving for the spending requirement, and (2) it allows you time to shop around for the best price and lock in the lowest rates.
Have more tips? Add them to the comments below.
Sounds very complicated but with determination and right amount of discipline this is surely doable.
These are really great points! The sleep on it rule is really my favorite! It works best together with being aware of your budget!
Interesting story, Janette. Thanks for sharing.
Actually, if you tend to use a debit card (as I do), you don’t need to write down every purchase so much as keep your receipts.
Recently took a trip with only cash (#8). It was a bit scary to carry that much cash. What I found was the amount I spent on the trip was much less than normal. I paid for EVERYTHING in cash- from gas to hotel room to eating out to groceries. Next time I will just put $1000 in an account with a debt card, but I needed to know what it felt like to touch the money
We travel to see family four to six times a year (#10). They all live between 1500 and 2000 miles from us. We spend, on an average, $1500 for the two of us on each trip. Now that we are retired, knowing that budget is important and paying in cash is the best way to handle it for me.
After this trip I really realized that going on “other travel trips” (#3) are nearly impossible if our priority is to stay where we are and still see our family. We no longer journey to Target or the mall in our spare time (#3).The children, mom and grand baby are all worth it!(#1and 2).
Well written numbered list!
Swith to only cash – you mentioned this is good for people who struggle with credit cards, but it’s also great if you struggle with DEBIT cards. We always seem to have enough in our checking account to spend on misc items with our debit card, but that money was allocated towards something else in our budget. Plus research shows that when you “swipe” your card to pay (debit or credit), you spend MORE money on purchases, many times without even remembering how much you actually spent. It’s much harder to part with cash. You can see it and feel it dwindling in your pocket (or envelope) as you spend it, knowing it won’t be replaced until the next budget cycle.
@Jason – Excellent point. I didn’t think about that but yes, long after you’ve stopped tracking you’ll have better awareness in general.
@Jon – Some recommend a 30 day rule for larger purchases.
I like cash-only.
#9 is the single best piece of advice I have heard. Sleeping on it has saved me a nice sum of money. Typically, I end up waking up and realizing that I don’t really need to buy it!
I think the 7th rule is the best, because that way you actually think about what you’ve done instead of just forgetting about it. This will create valuable spending habits in the future.
love the “sleep on it rule.” Saved me bunches.
The sleep on it rule has always been a huge money saver for me! Even better is to have to save for it. I’ve always waited to buy big purchases until I’ve had the money and tried to find it online cheaper in the meantime!
At some point, we all need to create a budget to control our spending. This blog is actually helpful helpful to analyse my expenditure and sections where I can control my transactions. Someday, I might want to try the online budgeting tool to ease the process. I will need some dedication to follow these steps, but will surely try my best.