We all want more money, and many of us would like to work less, as well. This may seem like a dilemma, yet there is a solution. The best way to increase money without working is to avoid spending it in the first place. Some people call this a budget, but you could just as easily call it a spending plan. Here are a few tips to help you maximize and stretch your hard-earned cash.
1. Create a Spending Plan. Many people resist the idea of a budget, associating it with hardship. Instead, look at it in a positive, proactive way. Create a monthly “spending plan” for your fixed and discretionary (optional) expenses. When you plan your spending, you may find you spend more wisely - you’re taking control.
2. Pay Yourself First. Put savings and investments at the top of your spending plan. If you wait until the end of the month to invest any leftover cash, you may find yourself with an empty nest egg when you need it most. Also, the sooner you begin investing, the better. The power of compound interest can provide significant growth over time. A good rule of thumb is to save at least 10% of your income first, before spending the rest.
3. Track Your Spending. Record your expenditures for a month, especially for small optional items. You may be surprised to discover how easily purchases costing only a few dollars add up. At the end of the month, review your expenditures and adjust your spending plan accordingly. Once you see where your money is going, you may want to make different choices about your spending.
4. Live within Your Means. Many people feel they never have quite enough to live on, yet we probably all know people who manage successfully on less. Spending is relative. Ask yourself, “Do I really need that extra-large screen TV?” If you live within your means, you will never overspend.
5. Shop for Value. Look for opportunities to get more value from each dollar spent. Join a warehouse or shopping club and buy in bulk. Purchase clothing, furniture, and household goods when they are on sale. Consider buying used cars and appliances. Big-ticket items like these often experience large price drops in the first one or two years.
6. Minimize Debt. Keep your debt level low. By reducing debt, you also minimize interest and finance charges. When you are tempted to charge a purchase, remember that you are committing yourself to pay for it from income you have not yet earned.
7. Eat In. Restaurant dining can be expensive, since you are paying for service, as well as food. Tips and meal taxes can add 15% or more to the bill. Liquor and desserts (which you otherwise might not eat at home) can boost the tab even higher.
8. Reduce Housing Costs. Housing is a major fixed expense. Consider reducing this cost by buying or renting a smaller place, or one with fewer amenities. If you rent, and plan on staying in an area for more than a few years, consider buying. Owning a home is often more expensive than renting at first, but the costs are usually lower in the long run. Plus, a house is an investment that generally appreciates over time.
9. Reduce Transportation Costs. Transportation is another large expense for most families. Many households now own more than one vehicle. The more cars you own, the higher the costs for insurance, repairs, fuel, and parking. Use public transportation, if possible. The slight inconvenience may be offset by your savings in vehicle-related expenses. Also, consider buying a used car. A good, used auto will get you where you are going as well as a new one, and will likely cost much less.
10. Set Aside a Cash Reserve. Having a cash reserve can help you stick to your spending plan, and keep you out of debt when emergencies, such as a major car repair or short-term disability, arise.