START TRACKING YOUR SPEND
Get to know where you spend, how it makes you feel and what really matters when it comes to your money!
Let's stop pretending that being good at money means you need to be good at math. Instead, let's listen to our body and our mind.
If you’re like most normal human beings attempting to navigate life through a global pandemic, you probably can’t seem to normalize this ‘new normal’ in most aspects. For me, though, the most challenging part of 2020 has been attempting to avoid non-essential spending when I have been spending a lot more time at home and a lot more time indoors.
Looking at the same four walls in a home can quickly help you realize things you’d like to change and update. Trying to entertain a toddler who misses hanging out with other kids their age can mean you’re buying many more colouring books and sticker packs than usual. In other words, non-essential spending has been slightly higher than expected for some. For others, it’s likely gone down. So, how can you cut back if you’re going over budget, and how can you keep these habits up when things start to get back to normal.
First, it’s vital to understand what non-essential spending is. Ultimately, non-essentials are the same as wants. For example, we need food and shelter. But we want to buy lattes and new clothes. It’s important to sit down and determine what parts of your budget are essential and what pieces you could cut back on if necessary.
This way, you are ahead of the game if you happen to experience job loss, pay decrease or another financial emergency that requires a tighter budget. An excellent first step to help cut back on non-essential spending is to create a list, similar to that of a pros and cons list, that confirms wants versus needs. You don’t have to go as far as restricting yourself to Maslow’s Hierarchy of Needs – but it might be a good idea to create a more restrictive list and a more liberal plan that allows for some freedoms.
A good example of this is that I allow myself to spend more money on beauty products when I have a more flexible budget and more income than usual. When I have less income, that is not essential for me. I can also always argue that a phone is a need as it helps me communicate with loved ones and get my job done. But, if needed, I could find a cheaper phone plan to reduce my budget line.
Now that you have a clear idea of what your non-essential spending consists of, it’s time to set a plan in motion to accomplish reducing the amount of money you spend. Before I share some of my favourite tactics, I want to be clear that these tips are not always ‘fun’ or ‘easy’ to achieve. For one, if you’re used to buying certain things and suddenly have to go cold turkey, it might be a tough pill to swallow.
Secondly, it’s not always healthy to completely cut yourself off from your fun purchases because it could lead to a greater desire to want to buy more. With that, it’s crucial to find a healthy balance and learn what tips work for you based on personal experience. Everyone needs a unique money management style because we all have different lives.
One of my favourite ways to cut back is by creating different chequing accounts that hold each spending limit. For example, if I always budget $1,000 for rent, that account will have $1,000 inside allocated explicitly towards rent. The same would go for entertainment. Perhaps I’m used to spending freely. Instead, limit yourself by only putting $100 into that account for the month. Two tools that can help you do this without using cash are Koho and Brightside.
If you’re an impulsive person, non-essential spending can be a difficult feat to control. Instead of ultimately limiting yourself from enjoying the occasional trip to the mall or online shopping, let yourself look and fantasize about buying items without actually pulling the trigger. Leave the store before you buy anything and exit the window with your cart still intact. If you are still thinking about those items the next day, it might be worth the investment. Otherwise, you can feel the thrill and temptation of shopping without actually going over budget on an item that isn’t a need.
If you are looking to cut back on spending, it’s always a good idea to assess your current budget to see what seems to be causing lifestyle inflation. You may find you are consistently spending more than you make but not know how it’s happening. That’s normal. Take some time to review your spending from the previous three months to gauge a realistic average. Maybe some spend used to be non-essentials, and they are now a necessity (and vice-versa). It’s okay to change your lifestyle and what you need if you can afford to.
Once you create these good financial habits that allow you to live a less luxurious lifestyle, it’s easy to get sucked back in when you start to earn the same amount of money as you did before the pandemic. But that doesn’t mean you should.
It’s important to stay vigilant with your budget, regardless of how much money you earn. Just because you feel comfortable one month doesn’t mean that things can’t change or you won’t have to readjust. If COVID-19 has taught us anything, you cannot control everything and that no career is safe during a challenging economy.
When things are good financially, it’s always ideal to continue to live below your means and focus on saving up an emergency fund to protect your financial life when things unexpectedly change.
Oh no, you missed the live webinar! But, good news: Mixed Up Money is pleased to share a resource for anyone planning for a future child or family.
Mixed Up Money is pleased to share a free resource for anyone looking to cut back on non-essential spending. My most-requested product is these monthly calendars to share on your Instagram story, use as a phone background, or print off to track your spending habits.