Dad used to say “There are two kinds of people in this world. There are simplifiers and complicators.” That statement really hits home when you google “personal finances” and get 195 million results in less than a second. How much more complicated can personal finances get than almost two million tidbits of financial advice just for you!
If all you are trying to do is make ends meet, all the advice in the world can be boiled down to one thing: Spend less than you make. If you are trying to make ends meet and pay off debt, worrying about anything other than that is a waste of time.
Focus on the basics. Don’t make things complicated. Keep it simple. Spend less than you make.
Start by documenting every penny you spend for 30 days, whether you spend using a credit card, debit card or cash. At the end of the period, you’ll be able to see where your dollars are going—and you’ll be more conscious of where you are spending on things that may be a waste of your hard-earned dollars. If you are like most people you will discover that you are spending more than you are earning each month.
Once you have 30 days of tracking, you can see which expenses are necessary—mortgage, insurance, food (needs). And you can also determine how much money you spent on discretionary items (or wants).
It is easy to drift into spending habits without taking a long hard look at where the money is going. Look at the house–it is too expensive for your current circumstances? Is it time to sell, and move to a less expensive area and downsize? Would you be better off renting?
What about the car–are your car payments busting the budget? How much could you add to your monthly budget if you sold the high-priced car and purchased a used more economical vehicle?
After you review the required spending, take the discretionary spending and rank it in order of importance. Do you have a gym membership you are paying for but not using? Do you really need to eat lunch at a restaurant every day or could you bring your lunch to work a few times a week? Is parking costing you $100 a month? Can you carpool and share the expenses?
It is so easy to create habits without realizing it. Look at your lifestyle and see if there are things you can cut back on or eliminate. Dine out less often and cook at home. Pack your lunch for work. Comparison shop for groceries, buy at the discount store or use store brands. Buy used clothes, especially since kids grow out of clothes so quickly.
You get the idea. Stop the waste! If you really want to stop living on the economic edge, examine and challenge all your expenses to make sure you know every dollar is being spent wisely.
Saving money is another area where it’s important to keep it simple. If you have to transfer money into a savings account each payday, you are unlikely to do it. If you wait till the end of the month to save, there is usually nothing “left over” after you spend the rest of your paycheck. Make saving your first priority. Set up an automatic transfer on paydays from your checking account to your savings account to build up your emergency fund and short-term savings. Set a realistic savings goal and treat it like a regular bill.
When you start saving, make it hard to use the savings as a slush fund. Move the savings into another account, maybe even a different bank to make the money harder to access. If it’s easy to access your savings, it’s easy to spend it.
For long term savings, sign up for your company’s 401(k) plan, especially if your company offers matching money. Otherwise you are wasting a free gift. The more you can automate your savings, the better off you will be.
Tackle the debt payoff. Paying off debt is always a positive step. The money you are wasting in interest payments can give you that financial cushion you need to have more spendable income each month. Put whatever amount you can spare against the debt, even if it’s only an extra $5. Do it and keep building on your success.
It might seem hard to imagine, but it is possible to go an entire week and not spend any money. This will involve taking your lunch to work, eating dinner at home, and not paying for entertainment. If a “no spend week” sounds too radical, start by trying a “no spend day” once a week.
If you have a hard time staying on track, get someone to be your money buddy and help you reach your goals. Find a like-minded relative, or a trusted friend to help you stay on track and hold you accountable to do what you said you were going to do. Make it a long-term relationship, like working with a personal trainer, to increase your chances of success
None of these ideas are complicated. But making many small adjustments can lead to big changes. The less you spend on unnecessary things every month, the more money you will have to take care of your obligations and the more freedom you will have in the future.
Consistently spending less than you make will drive your financial success more than any of those 2 million internet search results.
The bottom line is that we are called to be stewards of all the blessings God has given us. In 1 Corinthians 4:2, we read: “Moreover it is required of stewards that they be found trustworthy.”
Spending less that you make in a responsible manner goes a long way in being a good steward.
Join the Compass Catholic podcast for more ideas about keeping it simple.