There are several aspects to effective personal money management. For starters, day to day spending generates cash flow demands, which must be balanced with resources at hand. Monthly repayment obligations, like loan payments and other recurring responsibilities, must also be accounted for, representing big-ticket budget entries, like homes, cars and higher education. As important as it is to make timely payments, getting beyond these hurdles each month is only one piece of your personal financial puzzle. In order to maintain long-term financial health, you must also find ways to set-aside money for the future.
Ideally, household income covers monthly expenditures, leaving excess funds to invest or place in savings. This isn't always the case, however, as consumers frequently bypass personal savings, just to make ends meet. If your household finances reflect a paycheck-to-paycheck lifestyle, you may find it difficult to reserve adequate savings. And if your income isn't slated to rise any time soon, it may feel as though you've reached a financial impasse. Fortunately, trimming household expenses has the same impact as getting a raise, so maintaining a frugal approach can lead to money in the bank.
Make the Most of Your Resources
Maintaining balanced cash flow accounts for incoming funds and outgoing payments. When the supply-side of your personal economy is flush, funds are typically available to earmark for savings and investments. On the other hand, as your balance sheet falters, finding money for your future is easier said than done. In fact, without growing resources, you'll need to stretch existing income to cover your bills and provide for the future. Use these tips to make the most of household income.
Quality over Quantity – As consumers, we fall prey to a revolving cycle of purchases, which often has us buying the same items again and again. Succumbing to low-price marketing, we're lured to buy disposable or inferior versions of items we use regularly, leading to wasteful spending over time. Although an item's low price might be attractive on the surface; performance, durability and cost-effectiveness may suffer at the hands of a perceived ‘deal'. Instead of frequently replacing poorly made consumer goods, try to make each purchase count, focusing on quality construction and materials, rather than simply chasing the lowest price.
Fix It – Consumers who've been at it for a long time may recognize a shift in the modern buying cycle. Serviceable goods, for example, aren't always repaired to extend their functional lives. Instead, buyers cast-off broken items, in favor of costly replacements. Though some are rightfully destined for the refuse bin, many items can be repaired, for a fraction of the cost of buying replacements. If you are committed to stretching household resources, slow the flow of consumer goods through your home. Instead of deferring to replacement, change your mentality to focus first on repair, rehabilitation and rebuilding. From appliances to vehicles, cost-effective fixes leave more money in your savings account.
Lower Your Expectations – Once you've grown accustomed to a particular lifestyle, it can be difficult to adjust your expectations. As financial realities set in, however, it may be necessary to modify your spending habits to carve-out personal savings. Cost-cutting doesn't necessarily mean letting-go of meaningful possessions and privileges. Rather, the process simply realigns your expectations, to synch with your income. To highlight savings opportunities, evaluate spending on an ‘as needed' basis. Is it really necessary to stay current with each new model released by electronics companies? Or is your past-generation smartphone adequate for your needs? Can you afford to buy designer clothes? Or will economic replicas stand-in as wardrobe substitutes? Are you watching all those cable channels? Or will a less expensive alternative get you by? Apply this litmus test to your entire household budget, with an eye toward lower overall costs.
Second-Hand Savings – When brand-new pricing doesn't match your budget, turn to the preowned market for substantial savings. Cars, for example, depreciated rapidly, so buying used dramatically slashes the price of ownership. The same frugal philosophy applies to widespread pre-owned purchases, which are facilitated by online selling venues (eBay) and locally advertised, second-hand marketplaces (Craigslist).
As important as it is, setting aside household savings can be an elusive prospect for personal money managers. Too often, pressing financial concerns and day-to-day spending obligations wipe-out reserves, before cash can be earmarked for savings. If you are struggling to save money for the future, turn to these cost-conscious strategies to lower household spending. In the end, money you save on household purchases can be diverted to investments and savings accounts, protecting your long-term financial health.