Kimm Oilar

Spending with a Purpose

Let’s face it: culture today promotes wasteful spending. We are living in a society in which advertisements are thrown at us from every direction, candy is put near the registers in the grocery store, and new technology from our favorite brands is released every few months. Most people do not realize that the side purchases they make on a regular basis, those picked up as more of an afterthought, are truly affecting their bank accounts. There are two types of spending – purposeful and wasteful – and many people fall into a lot of wasteful spending without realizing it. Taking the time to track your finances can give you back control of your bank account, and make all of your spending purposeful.

In order to keep track of your finances, you must sit down and determine how much you have left over every month after expenses. Write down your total income per month, then subtract from it your fixed and variable expenses. Fixed expenses include things you pay for that do not change per month, such as rent, utilities, and a gym membership. Variable expenses are those with a fluctuating amount that you pay on a monthly basis, such as groceries, clothing, and eating out. You should devote a certain amount of money to each variable expense, and work each month to not go over that amount.

Next, I would suggest writing down your financial goals. These can be as specific as ‘I want to save X amount a month to pay off my debt’ and as vague as ‘I want to put a little away each month to go on vacation at some point.’ Whatever your goals are, they must exist to put a cap on the amount you spend each month.

Once you have your goals, it is time to start cutting unnecessary spending out of your monthly budget. Break up everything you spend money on into two categories – either completely necessary for survival, or nice to have. For example, rent and groceries are completely necessary for survival, so you must allot money to those two things each month. However, gym memberships and magazine subscriptions are not necessary to survival, and therefore should be removed from your monthly spending if they are having too much of an impact on your bank account.
Once you have completed all of the above, you are well on your way to being a purposeful spender. If you struggle to keep track of how much you spend each month, consider downloading a personal finance app on your phone. You will find that, once you really start tracking your finances, saving money is easy!

Kimm Oilar

Making a Budget

Personal finance has many moving parts, and is therefore especially difficult to keep track of. If you are crafting your first budget, or revising an existing budget, you may notice that your money goes toward over 20 different things a month. You have to spend your income on necessities like food, rent, and travel, and want to put some money toward social time and other activities that enhance your quality of life. The good news is that all of these things can be accomplished, as long as you create a stellar budget. Follow the tips below to craft a budget, and therefore be smarter about how you spend your money each month.

Record Your Monthly Salary, then Subtract

Before you do anything else, you should write down your income for each month and subtract necessities. Necessities include rent and utilities, money for groceries, and travel expenses. Be very careful with the items you consider to be necessities; sure, a gym membership is handy, but it is not something you need to survive. Make sure, in this first round, you only focus on what you cannot survive without. Experts state that necessities should take up 50% or less of your total monthly income. If the number exceeds that, consider ways to cut down on costs. You could, for example, shop at a less expensive grocery store, or live with a roommate.

Put Money in Savings

No matter how much or how little money you feel you make, there is no excuse not to put at least a small amount of money in your savings account each month. Having money saved up is a necessity for everyone. Not only will it make future travel ventures possible, for example, it can also serve as a necessary cushion if a life-altering event takes place. Consistently putting money into a savings account is just a smart thing to do.

Try Paying More with Cash

Many people have gone on long stretches of paying for things using only cash, and it has helped them save money in the long run. When paying for everything in cash, you tend to consider your purchases for longer periods of time. You are less likely to make impulse purchases when you are faced with physical, disappearing bills. The small purchases that usually add up will not have a chance to ‘disappear’ into a card, and therefore you will become a more conscious spender.

Make Sure to Include a ‘Random’ Section

When setting up a budget, you have to account for expenses of which you are not currently aware. No matter how much we try, a little bit of our money disappears each month due to random expenses. Therefore, it is good to already have money allocated for such spending.