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How to Reduce Your Spending

by Don Current on May 17, 2010

Dollar signOkay, I’m just going to get this out of the way right off the bat. Please excuse me here. I’m going to use the ‘B’ word. Yeah, ‘budget’. You will continue to struggle with reducing your spending until you establish a budget and learn to live on it. It is the starting point for gaining control of your money. It is the starting point for reducing your spending. It is the starting point for eliminating your debt. It is the starting point for determining what you need for retirement. Are you getting the picture here? If you don’t get in the habit of telling your money what to do, you will continue to wonder why you just can’t seem to make ends meet. Yelling at your spouse or your kids to stop spending so much really doesn’t accomplish anything. You have to figure out where it’s going in order to figure out where you can spend less.

Okay, now for some other tips. Get an auto deposit set up for your paycheck. Make sure that what you have decided goes into savings gets put in savings automatically as well. It will reduce your tendency to spend it if it is not easily accessible.

Spend cash. It is a proven fact from numerous studies that using cash reduces the amount of spending. That’s why fast food joints started accepting credit and debit cards. Studies showed that the amount of the average order was larger with plastic versus cash. There’s just something about holding those crisp bills in your hand that makes you want to hold onto them.

Also make sure you use an envelope system for your cash. Every payday, divvy up the money into the various categories on the envelopes based on what you’ve determined in your budget. When an envelope is empty, you’re done spending until the next check.

Once you have established the routine of using cash and living on a budget, it becomes much easier to reduce spending. Just allow yourself a little less in the categories you are trying to reduce when you set up the budget for that month. It’s much easier to do when you’ve got a plan and you’re used to following it.

Take a look at your insurance policies. Have you had them re-quoted within the past few years? If you haven’t had any claims in a few years, see how much money you could save by increasing your deductible. If you save $750 over three years by increasing your deductible by $500, and you haven’t had a claim in five years, well then maybe it makes sense to increase your deductible and save that money. Just make sure you have an emergency fund established just in case an accident does happen and you have to come up with that larger deductible.

There are many more ways to reduce your spending once you’ve gotten on a budget and actually know what you are spending your money on. What are some ways that you have found to reduce your spending?