I am sorry I’ve been so quiet this past week, I just wasn’t feeling inspired (and I’d hate to write a post that felt contrived and stale).
Last night I finished reading a book that was half chick lit, half financial guide – Living Thin by Antonia Magee. I have always lived paycheck to paycheck (no matter how much I’m earning) and I think that my mid twenties seems as good a time as any to start seriously saving.
So what invaluable gems of information do I have to help you clear any debts you may have and become a Saving Guru?
Get serious. You need to really want to change your spending habits to actually do anything about it. Think about what your financial goals will be and set yourself a realistic timeframe to achieve this in.
Write up a budget. I know, I know – boring. I have never wanted to do this because I thought it would become terrifyingly obvious how much money I throw away… and it was. When I saw the $ remaining row I was stunned. I should have this money sitting in a savings account with a smug grin accumulating interest.
Start with payments that you have to make (rent, bills etc) and calculate what this means for you on a weekly, monthly and annual basis. Is there anything that you’re not using or you could spend less on? If you don’t use your gym membership – cancel it. If your bills seems strangely high – shop around and see what other options are out there. Me? I had two internet services going at once because I kept forgetting to cancel the old one. Guess what I did this morning.
Analyse your spending. This is what I have been doing (right here for you to see) over the past couple of months. It is important to know what your vices are. Mine? Just about everything. Good food, wine, clothing, cosmetics, massages, stationary – the list goes on and on.
I did a breakdown of what I spent this week and how much of it was in my new budget (deemed necessary) and how much of it wasn’t. About 41% was spent on necessary purchases. That means that an embarrassing 59% was frivolously spent when it didn’t need to be.
You do however need to allocate some ‘fun money’ each month that can be used for entertainment, nights out, pampering or that pair of shoes that would “complete” your wardrobe. Why? Because without it, you’d probably only last about 6 weeks before you went on a spending bender!
Cut corners/dollars. If your budget looks damn near impossible (no room for 2 lattes a day, birthday presents, your 6 weekly cut and colour), try cutting some corners. This will be hard at first, but once you get into the swing of your new frugal habits it will all seem like a piece of cake.
- Coffee: If you can bear it, switch to instant or tea. Or limit yourself to one coffee a day. Or buy a used coffee machine off eBay to make your own before you head to work.
- Beauty treatments: Be strong and push it out one (or two if you can handle it) more weeks. Still biting your lip in fear?
Here are the calculations: Say you spend $100 on a cut/colour every 6 weeks, that is 8.6 treatments a year ($860). If you stretch that to every 7 weeks, it ends up being 7.4 ($740) and 8 weeks is 6.5 ($650). That’s saving you $210 a year (and that’s if you have managed to secure a fantastic cheap hairdresser!
- Nights out: I’m sure we all like to go out every now and then for a wonderful meal at a restaurant complete with drinks (and dessert if you’re anything like me), and there is nothing wrong with that. It’s about how often you do it. Inspire yourself to cook more often at home by purchasing a second-hand cookbook (or getting your mum/grandma/best friend to send you her faves).
Girls night out? Have a night in with a great DVD, homemade pizzas and a bottle of wine (or two).
If you are committed to going out, limit yourself to a few drinks (best deals are during Happy Hour) or one course on the menu (you can always go home for icecream later).
- Weekday lunches: I have been terrible at this, heading out to buy a salad or some sushi when really I should have made my lunch at home. Do it, your bank balance will be thanking you.
- Phone: If you are on a plan, think about switching to Prepaid – this will allow you to monitor your phone account much more closely. If you are already tied into a plan, monitor your usage. I was on a cap plan which was supposed to cost me $59 a month, but I was always getting charged over $100. Check your bills and usage regularly to see where the phone company is adding extra charges.
Also, if you have a home phone line consider how much you are actually using it.
- Clothes: If a fabulous dress or jacket is your vice, try adopting an In and Out policy. You can’t buy anything new until you have sold something you already own (the one rule being that you have to cover the cost of your new purchase with the sale of old items, meaning that you may need to sell a number of things before you can buy it – lay by if you’re worried about it selling out).
Prioritise. Pay off debts first, starting with the ones with the highest interest rates. There’s no point in saving while you have credit cards bills stressing you out. If you do have debt, think about finding the best deal in terms of low-interest.
Be disciplined. Do you really need that caramel slice? Don’t you have a skirt just like this one already? Shouldn’t you eat at home tonight as you went out for dinner last week? Asking yourself the right questions can help stop foolish spending.