It's Tuesday, your hands are sweating, you start pacing back
and forth because you're already a few days late on your bills... just 3 more
days until your next paycheque but then what? Only to be short on cash again in
a week's time?
Hopefully the above scenario doesn't sound like you, but unfortunately
throughout the past few years I have came across a few who actually lives
paycheque to paycheque (for my American readers, it's "paycheck"). In
almost three-quarters of those cases, it's not because they don't make adequate
amounts of money but rather it's due to lack of control. It is crucial to keep
track of your spending. A lot of us already do which is great, but there are a
few out there that do not. If you happen to know of such individuals, please
send them this article!
The easiest way to do so, is to keep all your receipts.
Whether you paid with cash or paid with credit card, by keeping all your
receipts and recording them in an Excel spreadsheet you can tell where
everything is going, and how dire the situation may be. Accounting isn't just
for businesses! By analyzing these numbers you can then see where you should
cut back.
If you are using Excel, I recommend setting up a column
where you classify expenses by codes. This way you can do some financial
analysis on it and show trends or charts once you have enough data. For example,
if you draw up a pie graph and over 60% of your monthly spending was on food,
you may want to consider going out less for lunch. Industry experts have recommended
that you should try to save at least 10% of your take-home pay and I agree with
them. If 60% is spent on food and 10% is saved up, that only leaves 30% for
other things! It's not too difficult, here are some options and ideas:
- Buy lunch only 3 times a week during the work week, interlace it with meals brought from home in between the 3 days
- Go for cheaper alternatives when buying lunch
- Bring lunch from home all 5 days of the work week, or
- Use the reward system, bring lunch from home all 5 days of the week but allow yourself to buy inexpensive snacks everyday, or perhaps a small daily latte from Starbucks?
Actually the reward system can be applied to other spendings, the key is to reward yourself for saving money. If you're still not convinced that it will work for you, here's the technical reason. The key is to replace items that give you satisfaction with inexpensive items that also gives you equal amounts of satisfaction if not more (in economics we call it Utility, which is simply a unit that measures satisfaction). Let's say doing one thing gives you a satisfaction of 5, as long as the reward plus the inexpensive alternative adds up to at least a utility level of 5, you should be just as satisfied if not happier.
http://ttfinancialadv.blogspot.ca/2013/05/why-groupon-may-not-be-helping.html
-TT
