(spending money – 3 minute read)
Ok then, time for another Sam Says opinion piece.
A client once spoke to me about her ex-husband. He was a high paid legal executive in some law firm. She was bemoaning the fact that despite his high income, they were always in debt. He never seemed to have enough money. Upon further questioning she admitted that he had a gambling and drinking problem which sapped most of his funds away. After the divorce she felt more financially free and actually had more money, even though her income had reduced as a single mom.
It’s a common story. I’m sure many of you know of colleagues or acquaintances who make more money than you do, but still seemed to not have enough money. Despite their high income, they lacked the financial confidence to use it effectively. Even with all that money, they never seem to be happy.
Click here to read about how money helps, but it won’t make you happy
Let’s talk about financial confidence
If you’ve been following this blog, you’ll know that I’m a huge advocate of financial confidence. Financial confidence here means knowing how to generate income, invest it wisely and having the confidence to know that you are financially secure. By keeping track of your spending, you will build financial confidence as well.
Financial confidence isn’t all about how much money you make. Sure, having a fat salary or a huge income will help you meet your financial goals. And I do want to emphasise that yes, making money IS important – up to a point. However, pulling in a $300,000 a year salary means nothing if you’re not spending your money well.
Read more about financial goals here!
It’s quite possible to be financially confident on a slightly above median wage so long as you are wise with your spending. So here are some spending tips that I try to incorporate into my personal life:
Spending money tip#1: Focus on the necessities
As humans we have three basic needs: Food, water and shelter. Everything else is a want (although some may argue that education is a need as well – but I digress). You’ll want to make sure that your spending covers these important needs first.
Rent/Mortgage payments will use up a big chunk of your spending.
Next will be the grocery bills and restaurants. Here’s where you can trim the budget a bit. By cutting down on expensive brands, alcohol, junk foods and other filler, you can save quite a bit of money here. When shopping, it’s good to have a grocery list prepared – this keeps you focused on the things you MUST buy and will prevent you from getting distracted by junk that’s on sale.
Healthcare and insurance are important as well – so you want to make sure you have money set aside for that. It’s not wise to skimp on these as if you fall ill, you’ll be wishing that you had it in the first place. And yes, education is important too!
Everything else is unnecessary. Board games, fancy cars, gaming systems, expensive shoes, etc. Yes, sure, you can still buy them, but only after spending on necessities and NOT at the expense of your financial goals!
Spending money tip#2: Keep track of those subscriptions!
Every service is a subscription these days.
It’s quite common to see households with Netflix, Disney plus AND HBO Max on their stream subscriptions. Even gaming companies are jumping on the subscription bandwagon with Microsoft Game Pass and Playstation Plus.
Subscriptions trick that part of our brain into thinking – oh, it’s only $12 a month to get access to ALL THIS CONTENT. But let’s be honest, many of us have subscribed to Netflix and found that, actually, 80% of the shows are boring crap. The same goes with the Microsoft Game Pass (which I subscribed to for a while). Once I had played the games I wanted to play, I promptly unsubscribed because there was nothing of value left there anymore.
Even if all the shows were quality, that’s a LOT of content to get through. No one has that much time in the world.
Look, $12 a month adds up REALLY fast. That’s $144 a year. That’s almost as much as my family’s weekly grocery budget. Let’s say you subscribe to three different services all at $12 a month each – that adds up to $432 a year . $432 a year spent on junk you’ll never have time to watch anyway.
Have a think about what you’re subscribing to and have a cull of your subscriptions!
Spending money tip#3: Keep track of your money!
I use a home accounting software called Pocketsmith. It’s good and it does its job well. There are other home accounting software out there like YNAB and Mint if you’re in the market for one.
Don’t feel like using an accounting software? No worries – with internet banking these days, its easy to pull up a transaction history of all your spending over the last month. That helps give you an idea of how much you are spending. More importantly, you know where your money is going and if it is being spent well!
If you are in a relationship where you share finances (like a married couple or similar), spending 15 minutes a month just reviewing last month’s expenses is a great exercise. It will help strengthen your financial brain AND it will strengthen your relationship. Many couples break up over financial issues – so this exercise helps build trust and co-operation over finances, helping to avoid nasty spats about money in the future.
Ok, I’m off to spend some money now!
Anyway, that’s all I have to share with you right now. I do want to emphasise again that yes, making more money definitely helps. And no, this article is no excuse to rag on low income families who are struggling to buy basic necessities for the family. I believe that low income families deserve all the financial help that they can get. This article is for all you middle to high income earners who still feel broke.
It is far easier to manage your spending than it is to increase your income. Go for the easy win and manage your spending so that you’ll have more money to put towards your financial investment goals! But if you can increase your income while managing your spending wisely, you’ll be on track to meet your financial goals much faster!
I’m sure at some stage I’ll write about how to increase your income (once I’ve increased my own income!).
So the next time you feel like you are broke, try out these tips and see if that helps you feel… less broke in the next month. (I’m sorry, I know that’s not the most inspring catch-phrase to use but I’m running out of ideas here!).
Stay positive!