Developing Good Money Habits

In the face of some of our country’s toughest economic times, we are forced to get back to the basics of imagination and creativity. Here are a few tips to getting your personal finances under control, while establishing habits to save money and create savings for your future.

Put Your Household on a Budget

  • First, determine how much you have been spending in categories such as food, utilities, entertainment, auto expenses, school and work lunches, childcare, etc. List the mandatory items before luxury or entertainment.
  • Next, take a realistic look at your take-home income from all sources
  • Now set up a spreadsheet (Excel is a great tool for this) reflecting your monthly income, actual expense categories and see if this is leaving you money for emergency savings, vacations, school tuition, etc.
  • Set up a budget column, filled in with an ideal cap on each expense category and a minimum contribution to your savings and goal categories each month.
  • Fill in what you spend in the “actual” column and see how it compares to the budget column each month. Keeping track of your household budget will reveal your spending habits, as well as which items you can adjust to bring them into line.

Groceries – Buy Only What You Need

  • Live within your means. Buy groceries for the week, and clean out your fridge before you shop; tossing out wilted or expired foods.
  • Plan out a weekly dinner menu and include your favorite staples on the grocery list. Buy only the freshest ingredients that you need for your planned meals; they are healthier and your family will enjoy them more.
  • Don’t get lured into bulk purchases just because they are on sale.
  • Save money by choosing from the top and bottom shelves; the more expensive (and usually less nutritious) items will always be at eye level.

Credit Cards

  • Keep your card limits low. Once you have made consistent payments for six months or so, the card companies will usually boost up your limit (to entice you to spend more). Simply call them and request that they lower them back down
  • Cut up cards you don’t need, but keep the accounts open, as they are part of your good credit history.
  • Don’t use your credit cards to buy things you can’t afford; this is where you get into real trouble. Remember that your charges constitute a “loan” and would you really go out and get a personal loan at 18 percent interest?
  • Using your debit card for purchases will remind you to spend what you have and limit impulse buying.

Cut Down on Your Utilities

  • Weather-strip your doors and windows; a ¼ inch gap at the bottom of your front door is the equivalent of a 3” square hole; an escape hatch for your heated or cooled indoor airflow.
  • Most power companies have a plan where they spread your annual cost evenly into monthly payments. You pay the same amount each month instead of getting hit with enormous bills to pay 3-4 months out of the year.
  • Use fans in the summertime as they take less electricity to run than your air conditioning; in extreme heat, your A/C can be set higher while running a fan to circulate the air in warmer rooms.
  • Change your filters regularly; your heating and cooling will be much more efficient and save you money.
  • Cancel your land line telephone; if you use a cell phone then you mostly likely have free long distance, call forwarding and voicemail, etc.
  • Plant shade trees around your home to keep the sun off your windows. Though “desert” landscaping saves watering, it can raise your inside temperature by 10 degrees.

Becoming more aware of your actual spending habits is not only a huge wake up call, but gives you a much greater sense of control. Your wasteful expenditures will be very obvious, as will the solutions. Coming up with ways to save money each month can be a fun and challenging exercise, giving all family members the tools to create their own financial freedom.

Sheila Barnett writes on personal finance and budgeting tips for Financial Calculator, a website dedicated to helping you plan for your personal financial and retirement needs. Her favorite tool on the site is the investment calculator.