Smart spending: Getting the balance right

Spending money isn’t an issue. We all do it, every day, whether it’s to pay for the bus trip to the office or buy the weekly groceries, but it’s important to make sure you’re not spending too much. By that, we mean living – or spending – within your means.

So, how do you find a balance and ensure your spending is smart?

Living within your means

What does that even mean? Well, put simply, to 'live within your means' is to spend less money than you receive as income. Spending within your means could be the key to improving your financial health – and it’s something you can start doing almost immediately.

How to spend smarter 

To live within your means, you first need to track your spending and create yourself a budget. By doing this you’ll start spending smarter and maybe even save yourself from impulsive spending decisions.

Step 1
Look closely at all your expenses and compare them to your income. It’s very easy to not realise how much you actually spend until you see those two figures side-by-side.

Step 2
Keep track of every transaction you make for two to four weeks. By doing this you can work out how much you spend on essentials like rent, utilities, any loan repayments and food. You'll also know how you spend the money you have left over after that – your disposable income.

This may sound like an overwhelming task, but mymo by P&N Bank can help make it easy. By linking up all your bank accounts into the one app, you can see exactly where you spend your money. The transaction categories make it easy to see at a glance your spending. For example, how your grocery spend compares to your dining out spend.

Step 3
After you’ve worked out where your money goes, set your budget goals and figure out what changes you need to make to achieve them. For example, if you want to spend less on transport, how can you reduce your petrol and parking costs?

Step 4
Now it’s time to work with what you’ve got and focus on reducing your spending to fit within your budget. mymo can help you here too – simply set up your budget in the app, and it will show you how you’re tracking, in real time.

Step 5
Put in place your budget and see how you track for four weeks. This will show you whether the goals you set for yourself are achievable. It will also highlight where you can make further cut-backs or adjustments to help you succeed at living within your means, long-term.

Finding the balance

We know it’s not always easy cutting costs, especially when things seem to get more and more expensive. Try not to punish yourself if it takes a few months to find your rhythm with it all. Like we said at the beginning, spending is inevitable and isn’t a problem per se.

To make the move to your new budget easier – and to ensure you’re spending smarter – try to find substitutes for things, instead of cutting them out completely. One of the easiest ways to trim your spending is waiting a while before hitting that online ‘buy now’ button. You may decide you don’t actually need to buy it, or even find the item cheaper elsewhere.

Don’t depend on credit

This point is crucial if you want to truly make a difference and live within your means: don’t depend on credit. Credit cards can be a good way of building your credit score, but it’s easy to fall into the habit of thinking that your credit limit is part of your monthly budget. Just because you have it available, doesn’t mean you should spend it – especially if you have multiple credit cards.

The interest you’re charged on your credit card can quickly add up and mean that the amount you owe becomes unmanageable. Focus on clearing any debts as a priority when you set up your budget. Then consider options that may help you over the long-term, such as debt consolidation.

Remember, you can ask your credit card lender to reduce your limit at any time. You’ll just need to pay back whatever you owe first.

So, what next?

Once you’re nailing the ‘spending smart’ life, it’s a good idea to look for opportunities that will allow you to grow your savings. Saving up an emergency fund will help you avoid reaching for your credit card (or another type of credit) when an unexpected cost crops up.

All habits, whether they are healthy or not, take some time to bed in. Create a realistic plan and do your best to keep at it, but remember to not be hard on yourself if you go astray. You can always adjust things if you feel your budget could be working better for you and your financial goals.