My past few posts have been comprehensive socioeconomic personal finance essays, so I thought I’d give you guys a break with something more practical today!
Hope you enjoy these 8 tips to add more money to your monthly (and yearly!) spending.
1. Track your spending
I’m sure you didn’t think you were getting away without this! One of the easiest ways to find more money in your budget is to know exactly where all your money is going. How you want to do this is completely up to you. Cait’s Mindful Budgeting planner is a beautiful low-tech notebook that you can carry with you day-to-day, or if you prefer something on the computer, the Money by Jumsoft is the app I’ve been using years.
2. Set up all fixed payments to happen automatically and coincide with payday
One of the easiest ways to manage your budget is to set up as many payments as you can to happen automatically. Things like your rent, internet, cellphone, electricity, car insurance, and so on should all happen without you having to write a cheque every month. You can choose to set these payments up to be debited automatically from your chequing account, OR you can have them charged to a credit card and then set up an automatic payment bi-weekly or monthly to your credit card for the total amount of your bills.
To ensure you always have money to pay these expenses, you can set up an automatic transfer to coincide with your payday. For example, I get my cellphone bill on the 5th of every month, but the payment isn’t actually due until the 21st. If I pay myself on the 15th of each month, I’ll set an automatic payment on the 16th of every month — this way there’s always money in my account and I never miss the bill’s due date. If you don’t like when your bills are due — for example, you have too many due the first week of each month — you can call your service providers and ask if there’s any flexibility in the due dates. You’d be surprised how often they’re willing to change to accommodate you!
3. Over-estimate variable expenses
One of the easiest ways to make sure you’re always flush with cash instead of running up short is to over-estimate your variable expenses by 10-20%…. or more. For example, my husband and I budget $200 per month for gas for our car, and 10 out of 12 months per year, it’s way too much. Sometimes we spend less than $100! We do the same over-estimation on spending for things like groceries and dry-cleaning. By over-estimating how much we’ll spend in these categories each month, we ensure there’s always money leftover. Coming under budget will keep you stress-free financially, and make it easier to accommodate the months when you go over in your spending.
4. Pay expenses annually when you can
Things like car and home insurance often give you a bit of a break on the dollar amount if you’re willing to swallow the bill once a year instead of on a monthly basis. If you can afford to absorb the cost of these expenses as a one-time fee, you could end up paying less overall. Plus choosing to pay your home or car insurance once a year eliminates a monthly bill from your expenses!
5. Give yourself a few hundred dollars of spending money
When you get serious about debt repayment or a big savings goal, you might be tempted to axe all “fun” spending from your budget. Many young people who write me have maxed out their credit cards and now feel so guilty about they’re debt, they don’t think they’re allowed to have spending money anymore. This isn’t true! First, don’t be so hard on yourself. Second, cutting any leisurely spending from your budget is not a good long-term plan, and more likely than not, after a few months you’ll end up feeling so deprived, you’ll give up on your debt repayment plan.
Make sure to give yourself at least $200 per month ($50 per week) that you can spend guilt-free on clothes, dining out, and hobbies. If you can’t afford to do this because your other expenses are so high, find a way to make more money. Being able to grab a coffee with a friend or go for drinks after work once a week can be the difference between feeling ok about your financial situation and completely hating your life. So be kind to yourself, give yourself a spending allowance!
6. Spend cash, save your change
If you follow step #3 above to give yourself a few hundred bucks of spending money each month, when you spend it and are left with pennies and nickels, put your spare change in a piggy bank. My husband and I put all our $1 and $2 coins in one piggy bank, and all our smaller change in another. When they fill up (and this might take months or years, but that’s ok), it amounts to a few hundred dollars that feels like “free” money. You can use it to splurge on something like new clothes or a vacation, or make a big payment towards a debt that you’re paying down. Either way, you’ll feel richer because of it.
7. Plan your purchases around rewards points
You should never buy something just because it’s on sale or because you get points for it, but you should plan your grocery list around the promotions that benefit you the most. Typically most grocery stores have a point system that works out to approximately a 1% return, which is better than most savings accounts. You can’t tell me you’re hunting everywhere to earn more than 0.5% interest on your savings than turn your nose up at the ability to do so at your local supermarket! If you can earn points for buying green beans instead of the broccoli you planned, go ahead and switch it on your list. Better yet, sit down with the grocery store flier when you make your shopping list, so you can maximize the promotions. When you have enough points to redeem for money off or free items, use it and put the money you saved in your savings account or use it to treat yourself guilt-free.
8. Always keep a buffer of a few hundred dollars in your budget.
Recently a study revealed that nearly half of Canadians are within $200 of not being able to pay their bills each month. Yikes! This means even something as little as a bad traffic ticket could put them behind on their bills. Don’t put yourself in this situation! When you’re creating a budget, try not to make a plan for every penny — even if it’s good intentions, like putting all your extra money to savings. Try to leave a few hundred dollars in your monthly budget for miscellaneous or unexpected expenses. At the end of the month, if you haven’t used this buffer, you can choose to roll it over to the next month or put into savings (an emergency fund is perfect!) and start again.