Unless you are lucky enough to have a never-ending source of money, you need to know whether you are living within your means; at least you do if you don’t want to get into serious debt. Theoretically, it should be easy to tell if you are spending too much money, but with credit cards, direct debits and online payment methods such as PayPal, it can sometimes be very difficult to keep a grip on exactly what you are spending. Here are some tips that you can use to tell if you are spending too much money.
Make a note of income and expenses
You should really have a budget that you try to stick to on a monthly basis. However, even if you do, you may not include every single item that you buy. Start making a note of every expense that you have, no matter how small. At the end of each month, subtract it from your net income. If you have plenty of money left over, you are living well within your means. If you struggle to save anything, you have to dip into savings, or you are slowly building up debt, then you are obviously spending too much money and need to make some serious adjustments to your finances.
Look at how much you are saving
Even if you are on minimum wage and struggle to pay your bills, you ought to be able to save a little bit of money every month, even if it is just a couple of pounds or dollars. If you’re on a good wage, you should be able to save much more. Take a good look at how much you manage to put aside each month. If you are barely saving any, then you are clearly spending too much and need to work out ways that you can put much more aside every month. If you don’t already have one, open up a savings account and leave the money there to gain interest.
Consider if you could spend less
You need to be honest with yourself. Look at both the necessities and the luxuries that you spend your money on every month. You need to eat and you need to pay certain bills, but you may be able to spend much less if you shop more sensibly and compare deals with different utility and insurance companies. When it comes to luxuries, you will almost certainly be able to spend less money. It is fine to treat yourself and your family every now and again, but if luxury has become part of your everyday life, then you need to adjust your expectations and change your outlook.
Look at your spouse’s and children’s spending habits
It is often easier to take control of your spending when you live alone. If you have children and a spouse who have access to your credit card or bank account, you may find it extremely hard to control your household’s spending. Come to agreement with everyone that they either stick to a certain limit every month, or they liaise with you before making a purchase. You may have strict ideas of what is a luxury and what isn’t, but your family members may not have the same view. When it comes to children in particular, you may need to explain the value of money a little more thoroughly. After all, their spending habits are probably directly influenced by you in the first place.
Turn to cash not credit
You will have a much better idea of whether you are spending too much money or not if you switch to using cash rather than credit cards and other methods of non-cash payment. For the course of at least a month, use cash to buy as much as possible, leaving just household bills to be covered by direct debits and standing orders. While doing so, remove any automatic payments for subscriptions that you don’t need. If you have to buy everything with cash, you are far more likely to think about whether you need what you are buying and will therefore know if you could improve your spending habits.
When you work hard and earn a reasonable wage, it is easy to get into the habit of buying what you want when you want. However, putting aside a certain amount of money for future expenses or emergencies is always a good idea. Work out if you are spending too much and then make an effort to change your ways.