Managing your spending is critical when it comes to sticking to your budget. Regardless of what you’re saving for, you have to be careful not to overindulge. Developing smart saving habits isn’t a walk in the park – it takes determination and willpower. Our platform is a powerful tool that can help you develop successful spending strategies, enabling you to pay down debt and reach financial success. Are you ready to stop living paycheck-to-paycheck and start chunking away at debt? Check out these eight brilliant spending strategies when you’re on a budget:
1. Understand Your Goal
It’s challenging to spend strategically without first understanding your goal. For example, what better spending habits help you achieve? Conscious spending helps many individuals pad their savings accounts, build an emergency fund, and repay debt. When you have leftover money each month, you can also start investing, making strides towards financial freedom. After identifying your goals, you should split them into two categories: short and long-term. Short-term goals consist of plans you want to achieve within the following year. These goals could include going on vacation, paying off your credit card debt, or renovating your home. On the other hand, long-term goals are goals you expect to reach in a year or more, such as buying a new home or starting a business.
2. Set Up Automatic Payments
Setting up automatic payments is one of the first steps to building solid spending habits and managing your budget effectively. From the internet to electricity, you likely have numerous bills that you have to pay monthly. If you miss a payment, your credit score could take a hit, and you may also incur a late fee. Almost all modern-day billing platforms let you set up automatic payments with your banking account details or a credit or debit card. You may be able to choose when you pay your monthly bill, making it easier to manage the timing of your monthly cash outflows.
3. Evaluate Needs vs. Wants
Life is full of tradeoffs, and your daily spending is no expectation. When it comes to conscious (and strategic) spending, you must carefully evaluate your needs and wants. Needs include items you can’t live without – housing, electricity, food, and gasoline. On the other hand, wants generally include the latest electronics, designer clothes, vacations, and restaurant meals. You can’t completely ignore your wants, especially if they bring you happiness. However, you must find a healthy balance between your needs and wants. Many financial experts recommend spending 30% of your income on wants (after having the basics covered, such as an emergency fund). Nonetheless, indulging in your wants isn’t always the best financial decision if you have outstanding credit card debt. Therefore, you should identify the best debt paydown techniques that fit your budget and allow you to minimize interest expenses.
4. Identify Debt Paydown Techniques
Strategic spending and paying down debt are win-win situations. Debt paydown techniques enable you to repay debt quicker and save money on interest in the long run. Our platform’s intuitive debt payoff planner lets you simulate various debt paydown strategies, including the debt avalanche method and the debt snowball method. As you refine your spending habits, you’ll have more residual income at the end of the month. You can use your residual income to chunk away at the debt that’s been haunting you for years. With Chunk, you can identify the best path toward debt freedom with our resourceful debt payoff planner app.
5. Pay Yourself First
It’s tempting to engage in unnecessary spending when you let your entire paycheck hit your checking account. Most financial gurus live by the words, “pay yourself first.” If you follow this strategy, you should have a set amount (or percentage) of your income go directly to your savings or investments account. You’ll then use any remaining money to pay your bills. This strategy is highly effective because it makes it easier to avoid temptations and progress toward your short and long-term financial goals. When you pay yourself first, it’s much easier to focus on your needs instead of wants.
6. Cut Subscriptions
According to data from the Subscription Commerce Conversion Index, the average American subscriber has five subscriptions – a 200% increase from quarter one of 2021. Consumers spend approximately $40 per month on their subscriptions. While $40 doesn’t sound like a lot, it can certainly add up over the course of a year. It’s also easy to accumulate subscriptions and forget about them. Our transaction tracker lets you view your monthly and annual subscription spending. There’s no need to trace your bank statements – you can identify all your subscriptions in one place! After cutting down on your subscriptions, you should have more money to allocate towards long-term savings and debt repayment.
7. Use the 50/30/20 Rule
Made popular by senator Elizabeth Warren, the 50/30/20 rule suggests spending 50% on needs, 30% on wants, and saving 20%. However, if you have outstanding debt, you can allocate the remaining 20% between savings and debt. The key to successfully following the 50/30/20 rule is to separate your needs from your wants. Needs include rent, car payments, gas, food, and utilities. On the other hand, wants include entertainment, dining out, and subscription services. Many people who live by the 50/30/20 rule pay themselves 20% of their salary first and spend the remaining 80% on needs and wants.
8. Evaluate Your Current Services
Other recurring services that you can trim include internet, cable, cell phone, and electricity. If you haven’t touched your plan in a decade, there’s an excellent chance you can get something cheaper. Sometimes the best option is to switch providers altogether. You can monitor your savings using our transaction tracker. Evaluating your current services and choosing more affordable options could save you hundreds of dollars per year, making your debt paydown goals much easier to achieve.