How Your Spending Can Help Guide Future Habits With Money
We’ve all been there, too much month at the end of the money or you make too much money to be this broke!
It’s not a fun place to be and when you’re feeling that stressed with money, you can’t possibly see a way out.
What if I told you that if you looked at your current spending habits, you’d probably be able to tweak a few things to relieve your money stress? Of course there are always the situations when you simply don’t make enough money (you’ll have to increase your income or lower your monthly expenses) but I’m talking to those of you that have a decent income but it never seems to be enough.
This is where tracking our spending comes into play and it’s a total game changer! When we see where our money actually goes, versus where we think it goes, we are able to do a better job with our everyday spending. Do we want to continue spending the way we have been or do we want our money to be going towards something else like a vacation, season tickets at the local theater or a larger Christmas fund?
So how do you go about tracking your money so that you can make changes to actually be able to afford the things you love most in life? Here is a free 90-Day Expense Tracker that you can use to get started. Use bank statements, both checking and credit cards, Venmo history and whatever other accounts you spend money out of to fill in this spreadsheet to get your monthly averages. These averages will tell you how much money you spend in any category on average.
Since money isn’t an infinite resource, it helps to see how spending in one area will decrease the amount you have available to spend in another. This is when we can ask what’s more important, this new pair of jeans or another day at a resort?
When you compare those totals to your monthly income you can start to ask yourself, can I afford to keep spending this much money in certain categories or is this the reason that I run out of money each month?
Use your monthly averages to outline a budget and don’t forget to include your goals like that vacation you have been wanting to go on. If the totals in each category are more than you make in a month, you will have to reduce your spending in some areas.
By aligning our planned spending with our income, we can ensure we reach our goals and continue to do what matters most in life, without going into debt. But the trick is to get started. Start with the 90-Day Expense Tracker to see where your money is going and decide, is this the path I want to stay on or do I have other plans for myself?
What You're Missing Out on if You Have One Job
The days are long gone that you get everything you want in life from working at one company. Not only might your needs and wants change but benefits aren’t like what they used to be, oh man I sound old. Pensions are rare and the days of a household having one working parent and one stay at home parent without financial stress are gone.
There are so many benefits to making a little bit of extra money outside of your day job, let’s dive into just seven of the reasons and then we’ll explore how you can make more money!
Protection for you and your family
If 2020 taught us anything, it’s that our jobs are not guaranteed. Losing your job can be out of your control and it can also be out of your company’s control. It doesn’t matter how great an employee you are. So let's protect ourselves and our families. If your hours are reduced at work or you don’t get that annual bonus, don’t let your lifestyle or your goals suffer.
Limitless income
When you start working for yourself, your income is tied to you, not the limits to your job title at work. If you are selling custom earrings for example, you can make more money as you make more products, share them online or attend artisan fairs. When you take the reins and start acting, not reacting, your options are endless. I don’t say that to sound cliché, I say that because it’s true.
Making money while you sleep
Selling without having to physically be in a specific space is magical. This is how you see so many people making money while on vacation or waking up to “you have a new sale” email. When you can streamline your side hustle to be online and available to consumers 24/7, your income ceiling is limitless. Go create a website or post your products on social media and start selling while you sleep.
Exploring a hobby
Have you ever wanted to start something but was afraid for some reason? Turning a potential hobby into a side hustle is a great way to test the waters. I didn’t start flipping furniture because it was a dream I had. I started because I loved buying vintage pieces but quickly had too much furniture for our tiny house (I was also spending more money than I wanted to). So I started selling furniture that I didn’t mind parting with as I bought new pieces. I sold my coffee table when I found one I liked better and I did the same with my dining room table. I quickly learned that I could make money at the same time that I was updating my house. Start small and start with an area you are already interested in, you don’t have to go all in right away.
Reaching your goals faster
When you have a side hustle and you are intentional with that extra income, you are able to reach your goals rather quickly. It doesn’t matter if you are trying to pay off debt, build an emergency fund, go on that family vacation or stop the paycheck to paycheck cycle. This was a big motivator when I was paying off my student loans. Since I was working extra I was able to still go out to eat and go on vacation because my extra income was all going towards debt.
Flexibility to work when you want
A huge perk of being an entrepreneur is that you get to work when you want. You get to decide if you are maxed out at your day job and need a break or have some free-time and want to dive in. Don’t create unnecessary stress by over committing yourself. Complete tasks you need to get done for your side hustle when you are up for it, and stop when you are over it. If you find that you are never really in the mood, choose a new side hustle, that might not be the one for you.
Potential to go full time
When I started Money Gal Coaching, I wanted to show people how I got out of debt and how anyone could do it. I never imagined this would be a career change for me. But since I started with a passion that I did in my spare time, I was able to find something that I loved that I can turn into a long-term full-time passion. When you can turn your hobby full-time, work becomes fun and less of a chore because you do what you love and you get to create the rules.
Ok so you have decided to go after your hobby or increase your income, but what should you be doing? There are so many options, here are just a few but take some time to think about what you love doing and how you can make money at it.
Living Paycheck to Paycheck? Do This to Get Ahead.
When you rely on your next paycheck to be able to pay bills, buy groceries or have drinks with friends, life is different. Life becomes less enjoyable.
What if your paycheck was something that became a side effect of work you loved? What if you started being intentional with that money to actually accomplish your biggest dreams?
Something shifted in my life when I decided to use my paycheck to accomplish my goals. I no longer looked at my account balance as money I had to spend. I looked at it as a lump sum of money that was broken down into smaller goals. Some of the money would be used to pay down debt, some was set aside in case of an emergency and some was for bills.
When I made this shift in my thinking, while being intentional, it no longer mattered when that money hit my checking account. I was no longer rich on the 1st of the month and broke by the 10th.
If getting ahead of your bills and not having to rely on your next paycheck to pay your immediate bills sounds like something you are craving in your life, I have good news for you. It’s easily within reach, you just need to make a few intentional shifts in your habits.
Sell anything around your house that you no longer need, use or want for some extra cash
Cancel any subscriptions you don’t use and ask yourself if you need all of the ones you do use
Cook at home and use everything in the fridge to avoid waste
Reduce your spending on everyday items by buying generic or in bulk while cutting your impulse and excessive purchases
Save any ‘bonus’ money such as stimulus checks, tax returns or gifts
Keep an eye on money you are giving out as gifts
Get a side hustle and find ways to increase your income
You don’t have to do all of these items, I would rather you do a few things really well than all of them poorly.
When I was getting out of debt, I focused on cooking at home, reducing my spending and increasing my income. By making more money and spending less, I was able to make larger payments to my debt each month without having to give up too much of my lifestyle.
Sure I had to get creative with my vacation time and say no to house projects. But by being intentional with my money, I was able to make real progress while still enjoying the things that made me happiest in life.
12 Things You Are Wasting Your Money On
OK, I am not here to tell you that you are bad with money because you are spending way too much money on certain things. Absolutely not! But I am here to be a friend that reminds you that “hey, personal finance, you got this, and here’s another way you can get even better with your money!”
Where we buy certain items can have a big impact on our money. By spending more money than we need to on certain items, we are basically lighting cash on fire or throwing it out the window.
Please don’t light your cash on fire.
A dramatic example, if you were walking around Nordstrom and you noticed they started selling toilet paper, would you buy it there? I hope not! I bet it’s going to be $63 for a 24-pack and that is just not responsible.
The same goes for everyday items we buy from stores that we find ourselves in more frequently.
Two reasons why you might be overspending is that you shop out of convenience, meaning you like buying everything in as little stops as possible, or you like shopping local.
Concerning the second point, I understand that supporting a local business is important. I’m not here to argue that, but it can end up costing you more money on certain items. If you are struggling to pay your bills or you are drowning in debt, I ask that you take a pause and buy certain things at a cheaper store while you catch up and get back on track.
Spoiler alert: I remember the first time I even noticed the Dollar Tree even had thank you cards. I was there with a friend who was looking for something specific. So I did what any good patron would do, I started walking the aisles to see if there was anything that I needed (which I am sure I didn’t need a darn thing).
I found myself in the stationary isle and noticed at least 10 different options for Thank You cards! My mind was blown because I always hated keeping these in stock at my house because they were usually expensive to buy! But here I could get a cute set, for cheap, and not feel guilty about it.
Another item is seasonal décor. While I am not a huge fan, I hate storing it to use only one time of the year, there are tons of options that are all budget friendly if this is your thing! And remember, Santa doesn’t care where you bought the stuffed snowman from, it’s the thought that counts!
Ok so here is the full list of items that you can find at discount stores, such as the Family Dollar or Dollar Tree, that have little to no difference in quality.
Greeting cards
Seasonal decorations
Notebooks
Wrapping paper and gift supplies
Storage bins and decorative containers
Party supplies
Vases and other decorative items
Dinnerware
Food storage containers
Cleaning supplies
Coffee filters (do people still use these?)
Travel size essentials and containers
Take some time out of your next errand day and jump into one of these thrifty stores to see what you can find. Make sure it’s already on the list, I am not giving you permission to go on a shopping spree here, though sometimes it can feel like you are robbing the place because it’s so cheap!
Turning Junk Around the House Into Cash!
If spending this much time at home has taught us anything, it’s that we have a lot of crap!
Seriously, how many knickknacks, items in a drawer, old electronics in a closet or old clothes does someone need?
I personally think that if Marie Kondo’s sparking joy movement would have landed on Netflix shortly after the ever-so-amazing Tiger King, we would be in a much better place physically and emotionally with our homes.
I don’t keep a list of random odds and ends that I sell, I honestly don’t need to rehash the amount of stuff that I owned at one point. But, by perusing my history on Facebook Marketplace (much better for household items than Craigslist these days) I have recently sold:
An old painting for a neighbor - $40
An extra trash can - $20
A leaf blower - $200
An extra charging hub - $15
An old cable modem - $30
An electronics docking station - $25
A Vikings jersey that I won at bar pre-covid - $75
Our dining room table, I found a cheap one that I liked better - $700
Our coffee table, also found a better one for free that I refinished - $80
That's $1,185 in my pocket that I never would've had otherwise, and I had to do was take a picture and describe the item on Facebook Marketplace.
You get the point. If you find yourself staring at something every day and it doesn’t make you happy or proud that you own that item, get rid of it! There is no rule that you have to keep it.
And if it can bring in some cash, then why not?
49% of Americans Are Concerned, Anxious or Fearful
According to Marketwatch, 49% of Americans are “concerned, anxious or fearful about their current financial well-being.” The not-so-funny thing is that this study was before 1) the coronavirus, 2) a potential recession and 3) record breaking unemployment rates.
This is almost half! Why do we continue to live life with debt if it is causing us so much pain? Ost of us don’t see a way out. It has become so normal in our society we truly start to believe there is no other way.
One roadblock when trying to get out of debt (which means living on a budget) is that you become an outsider. You start to have doubts that your friends will think of you differently, that people might think you are poor or that you can’t do fun things anymore. And the fact is that all those things can’t be further from the truth.
Aligning your spending with what you value most in life (vacation, a bigger house, fancy restaurants) is the best thing that you can do for yourself. Because you will be truly happy.
Don’t let what others “might” think of you as something that is stopping you. Being in debt shouldn’t be how you live your life, doing what makes you happy should.
How to Calculate How Much Money Should Be in Your Emergency Fund
Any good emergency fund consists of expenses that continue on during an emergency. While there are a few different scenarios in determining when we can tap into this savings, there is only one way to calculate it and it is pretty simple.
1. Housing - rent or mortgage, it also includes electricity, trash, water and those sort of bills. Netflix is not here, and if times are tough, neither is WiFi.
2. Food - groceries. Don't put your restaurant spending money or brewery adventures in your emergency fund calculations. This is how much money you need to put food on the table for your family. And if members of the house are still working, this includes packing a lunch (no going out to eat at work either).
3. Transportation - let's be realistic, even in a crisis you will need gas to go buy your groceries or to pick up kids from school. Maybe you take the bus, include your bus passes here instead. You aren't accounting for saving for a car in this fund or a repair that you want to get done in the future.
A proper emergency fund consists of 6 months of savings for the above items. Add up expenses for each month, times it by six and there you go! This money should live in a savings account that you have quick and easy access to. You are not trying to gain interest on this money, you are getting prepared for an unfortunate time in your life.
What to Do With Your COVID Stimulus Check
So, this stimulus check. What about it?
First off, check out this link to see the details on how much you may be receiving. Amounts vary but are up to $1,200 for individuals and $2,400 for those filing jointly (with $500 per child also in the mix). If you are behind on child support you won't be seeing a check. You will receive this money via direct deposit or a check in the mail, depending on your last filing method.
What should you be doing with this money? I can tell most of you that the answer here won't be to spend it. There are a few easy scenarios to cover but if you think your situation is a little more unique you can always reach out.
If your job is stable, you are not worried about lay-offs or reduced hours, this money should go towards any debt you may have. Let's say you don't have debt, then it should go towards your savings. If you have a five month emergency fund you can always invest or, my personal favorite, make a donation to an organization that is doing some good right now.
If you are at all questioning your employment then it should go towards your necessities and any leftover funds should go straight to savings. What are necessities? Rent/mortgage, gas for your car, food and utilities. Netflix? Nope. It's only $8.99/mo - nope. Getting food to go because you can't stand to cook anymore? Nope. Birthday gifts for friends because you feel bad they are stuck at home? Nope. Nope. Nope. You lost all or some of your income, it's time to save every penny you can.
Be safe and be smart out there!