If you’re anything like me, keeping records of income and expenses–and convincing your spouse to do the same–can be a real challenge. I started this challenge for myself by first saving every receipt from every purchase I made for a month, then I divided everything into categories to see how much I was spending and where. Finally, I decided which changes were going to have the most impact.

Here are 4 simple tips you can try that you might find helpful…

#1: Budget Envelopes. This may seem a bit old-fashioned, but it’s a great solution for visual people. When you get paid, take out the cash you need for the month and divide it into envelopes labeled as groceries, dining out, movies, clothes, vacation fund, miscellaneous, etc. This obviously is going to work best for things that aren’t automatic withdrawals – you must be sure enough money is left in your bank account to cover these bills. Once an envelope is empty, it stays empty until next month. No excuses.

#2: Set Limits. Set a limit for all non-essential expenses. If something comes up, for example you want a new sofa or cell phone, discuss with your partner and plan to save up in the miscellaneous envelope or better yet, create a new envelope for that expense and decide how much you can put into that envelope each month to save up for it. If it is something you want sooner rather than later, you may need to cut back in another category to speed things up.

#3: Annual Projections. In addition to keeping track of each expense, figure out how much each one costs per year. When you see that your $4 daily coffee actually costs over $900 a year, you may consider making coffee at home. Do the same with lottery tickets, alcohol, snack foods, impulse spending on clothes, new electronics, and so on. Keep all your receipts and record them in a spreadsheet to keep track of how much you actually spend.

#4: Reverse Budgeting. This means that when you get paid, you pay all of your bills and essentials first, then, whatever is left – if anything – can be used for non-essentials. It isn’t as structured as my first 3 ideas and doesn’t help you to build your savings though.

I hope you found this helpful. When it comes to changing our spending habits, discipline can be tough – but it does become easier with practice. A wise person once told me that if you work hard and sacrifice now, life becomes simpler later, but if you keep life simple now, you will work hard and sacrifice for much longer.

Sincerely,
Kim