If you’re saving up for a big purchase—like a new house, new car, education or something else—the first thing you should focus on is getting out of debt. The next step is to form a few good spending and savings habits to help keep dollars in your wallet and build your funds faster. Here are five spending habits you should adopt to help in having better your savings each month.
1. Create a budget
The first spending habit to adopt is creating and sticking to a budget. Budgeting can help you avoid overspending each month by outlining how much money you make vs. how you spend.
Write down all your expenses, including the cost and what the expense is. This includes bills, food, entertainment, gas, etc. Include bills you pay each month and random expenses.
Then, write down how much you make, including paychecks and other income.
Finally, subtract your expenses from how much you make. If it’s less than zero, you’re spending more than you make. If it’s higher, that means you’re spending less.
Every month, make a plan for how you’ll spend that money. Write down what you’ll earn, what you’ll spend on necessities, and what you estimate you’ll spend on other items. Stick to your budget to avoid unnecessary costs.
2. Plan purchases
To help stick to your budget and keep money in your savings, plan your shopping trips before you go. Make a list of what you want to buy and how much it’s going to cost. Set a budget amount that you won’t go over while at the store.
By creating and sticking to a list, you’ll avoid impulse buys, grabbing items you don’t need, or running to the store here and there to purchase different items, which can rack up spending quickly. It also helps never to grocery shop when you’re hungry.
If you’re making a purchase online, or want to buy something that’s not a necessity, think about how much you can afford to spend at that time and wait a few days before making the final purchase. That gives you time to decide whether you really want to spend money on that item.
3. Make substitutions
With some planning, you can spend less money on alternative items. For example, get the generic brand of groceries instead of the name brand. Or, instead of shopping at the designer clothing store, try hitting the outlet mall.
Figure out what’s most important to you and what’s not as important, and find ways to spend less on cheaper alternatives.
4. Find easy wins
If it’s been months since you used that gym membership, cancel it. If you have a subscription to a streaming service that you barely use, consider ending it. If you were paying for a membership to a pool but it’s now summer and you have free access to your community pool, pause your other membership.
After creating your budget and analyzing your spending, figure out where you can easily cut back and put those funds directly into savings. Don’t start out by cutting your spending in every aspect of your life. Instead, look for places where there’s unnecessary or redundant spending. Pay particular attention to subscriptions or monthly recurring payments that you don’t use or aren’t necessary.
5. Track everything
By tracking every purchase, you’re being more cognizant about your spending habits. You can write it down on paper, keep an Excel document, use an app, or another way that works for you.
Each month, review your purchases to help determine where you can cut back and improve your spending.
Be sure to also track your progress. How much debt have you paid off? How much did you contribute to savings this month? What progress did you make toward your savings and financial goals? Celebrating the wins can help motivate you to continue these spending habits and improve your savings.