How to Spend Less Than You Earn

Jan 13

If at the end – or indeed the middle – of the month the bank account is empty, there are lots of ways to change how you spend your money each month. Many are pain-free and don’t mean a huge lifestyle change. It’s more about looking at your situation and gradually adjusting outgoings over a number of months.

The first place to start is to take a thorough look at the income and outgoings of the household. Based on the cash flow, try and allot expenses under different subheads. To begin with, you should segregate your fixed expenses costs, and move on to the rest. You’d want to set aside some money for savings, investments, monthly bills, and other important outgoings.

There are also areas where you may be spending too much. Your energy bills, for instance, are a big expense. It might be that you’re paying more in electricity bills due to faulty or malfunctioning appliances or a wiring problem. Getting that fixed by an Electrician in Chelmsford, MA, if that’s where you’re at, could be the start of seeing a drastic reduction in bills, and your overall expenses. Similarly, cutting down on unnecessary groceries or days of the week spent eating outside may enable you to plan your spending habits better.

Drawing up a budget will show every penny coming in and every penny going out. It also helps you prepare better for sudden and unexpected expenses. There are many online templates to use to enter the figures, the most important aspect is that every spend – however small – is taken into consideration. Whilst a budget sheet may feel stifling to begin with, after a short amount of time, it will be seen as a great way to organise finances ( It will also be useful to see if an emergency financial situation is about to arise where a short term loan may be needed. If this happens, talking to the bank or to payday loans companies such as Wonga may be the solution to a temporary need.

Keeping a spending diary is a good way to see exactly where the money goes each month. For anyone who wonders where their income disappears to, it’s a fantastic visual record. It will show all the impulse purchases, the regular coffee and newspapers bought on the way to work and the little treats that are quickly forgotten about after the bank statement has arrived. Plugging the holes in the finances by knowing where money is trickling away to can make a big difference. Some people prefer to carry a small notebook around with them so they can jot down everything as they buy it, others prefer to keep an online note with an electronic diary they can update at any time.

For those who find it difficult to adjust their spending each month on their own, starting a blog or diary with other like-minded people can be a good way to support each other. Often, individuals find themselves emulating the lifestyles of their friends, engaging in activities like frequent partying, dining at upscale restaurants, and taking regular vacations. The motivation behind this often lies in a desire to avoid criticism and to seamlessly fit into a social group. However, to manage and reduce expenses effectively, it’s crucial to break free from the influences of Pluralistic Ignorance and peer pressure. A practical step is to conscientiously monitor and record expenditures by maintaining a diary. Establishing a non-judgmental environment for open and candid discussions about life and finances can be incredibly beneficial. Such discussions not only provide a platform to share experiences but also enable others to offer valuable suggestions based on their own financial journeys.

One of the most important aspects of starting to spend less each month is being able to talk openly about any existing debt. Debt will be draining the bank account each month and it’s a vital part of any budget planning. Where a household is headed by someone under the age of 35, 83.5% of those hold debt and it’s as important to tackle the issues around this part of the budget as it is the reduction of spending in other areas.

Cutting back on entertainment, takeaways and holidays doesn’t mean enjoying life has to stop. It’s all about changing habits; have friends round for a DVD night, cook from scratch or visit old friends instead to have just as much fun but without the large price tag.

By making small changes each month, the scales will start to tip and it won’t be long before you have money left at the end of the month. It takes focus and determination but it’s a great way to make some positive life changes and benefits everyone in the family.