The COVID-19 pandemic has Americans locked down for another month, according to the New York Times. The lockdown has put many Americans out of work. In California alone, 3.3 million people filed first-time unemployment claims.
With so much uncertainty, there’s a very good chance our economy is hurling towards another recession and it might be time to set your spending habits on a more conservative course. Take a look below at five ways you can cut back your spending to help you feel in control of your finances.
The small stuff adds up
An easy way to know if you need to change your spending habits is to ask yourself, “Where does my money go each month?” You may not worry about small purchases each week, but they can add up. Now’s a good idea to take more notice of them by doing an audit.
First, start by opening up your bank account or credit card account statements. Next, open up a spreadsheet or a notebook and organize your transactions into categories, like groceries, dining out, or Amazon orders.
Finally, identify the top three areas that you spend the most money. For some, frequent shopping trips can be the culprit. For others, it could be food. According to the USDA, the average cost of food at home in February 2020 ranged from a thrifty plan of $569.60 per month to a liberal plan of $1,297.60 per month for a family of four. And it may have gone up this past month, given how social distancing is forcing more cooking at home.
Regularly track your spending in your top three spending categories each week. The weekly check-ins could help you become more mindful of overspending and focus that money on more essential expenses.
Establish a routine
If you want to get better at something—working out, cooking, or financial habits—you have to practice, and to be able to practice, you need a routine.
A basic budget routine is a great regimen to help your spending habits. At the end of each month, you should look back at what income you brought in and how much you spent. Then you can forecast your spending for the upcoming month. Once a month is a great start, but you could do weekly or bi-weekly budgeting for consistency.
On top of budgeting, you’ll want to start regular financial conversations with your significant other. Research shows the more conversations you have about money with your spouse or partner the more satisfaction you’ll have in that relationship.
Create small wins
In Greg McKeown’s book, “Essentialism: The Disciplined Pursuit of Less,” the author suggests to avoid starting big with your goals.
“Instead of starting big and then flaring out with nothing to show for it other than time and energy wasted, to really get essential things done we need to start small and build momentum,” McKeown writes.
You might be tempted to do a spending freeze in which you completely stop spending money on nonessential things. Rather than going cold turkey, start small and celebrate progress.
For example, if you love doing a daily Starbucks run, make your own coffee once per week. Think about the average cost of your Starbucks coffee. Replacing even one day with your own brew adds up over the month and that can further spark good financial habits.
A great way to establish healthy spending habits is to visualize progress. For example, maybe you want to get better at spending less at the grocery store. Make changes in your spending habits by creating a grocery shopping tracker. It’s a sheet of paper that you can keep on your refrigerator door. Record the date, grocery store, and the amount spent each time you trudge in with an armful of food.
The tracker helps you quickly see how often you have gone to the store and how much you have spent without checking your credit card account. The visual helps you reduce spending. Plus, you can get creative with the food that you have to come up with quick meals that stretch your budget further.
You can implement this strategy with any area. Suppose you are prone to stopping off for fast food. Record on a sheet of paper every time you go, where you went, and how much you spent. Keep the sheet of paper in a place where you can see it, like your car console. The visual reminder could prevent you from venturing to the drive-thru again.
Focus your energy on one thing, not many things
There can be several moving parts to our financial lives, so you may have goals to address them all. But when you try to address too many goals at the same time, it’s harder to make progress.
If you want to change your spending habits, you need to focus your energy on one thing at a time. Perhaps it’s just figuring out your habits in general. Leaving everything else in neutral, focus all of your energy on putting together a budget. Once it’s in place, it is easier to tackle the next goal.
Financial hardship can come at the most unexpected times, and not just during the current pandemic we face. By developing healthy financial habits now, you can combat future obstacles with clarity.
How to change your spending habits and tackle debt
If you are struggling and already unable to make even your minimum monthly debt payments, it might be time to take action. Freedom Debt Relief is here to help you understand your options for dealing with debt, including our debt relief program. Our Certified Debt Consultants can help you find a solution that helps you feel in control again. Find out if you qualify.
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