You know how it is, we founder when it comes to the big purchases. The new car, the home improvements, the latest designer bag all fill us with a mixture of fear and longing. We could never afford that our brains tell us, but yet we want it. We work hard so why shouldn’t we be able to afford some of life’s luxuries?
We can blame the cost of living but perhaps once in a while it may be worth looking closer to home for an answer on how to best afford those big purchases. Looking at the money we spend and how we actually spend it could help us get to the root of our financial difficulties.
Keep a Journal of Daily Expenditure
A first step in attempting to unravel a constant shortage of funds is to keep a journal of how much we spend every day and how we spend it. Demanding, yes and daunting, even more so when we look back over our weekly spending habits. And reassuring, beyond a doubt when we calculate how much money we are spending that can actually be saved. Calculating what we are unnecessarily spending over a fifty two week, annual period can well lead us to understand that we are not actually short of money but of the skills to spend it wisely.
Calculate the Cost of Daily Treats
That daily coffee costs very little. Two or three euro will buy a decent cup of coffee. Not so bad. But having one of those coffees every day and especially if you add in the cake or doughnut that goes with it amounts to approximately twenty dollars per week. Annually your coffee bill can amount to 1040 dollars, the cost of a short break or maybe even part of the repayment on a car loan. The purchase of a thermos and bringing your coffee with you can add up to significant savings on a yearly basis.
In like fashion record your daily spending on lunches. A quick calculation of your annual expenditure on workday lunches may well have you purchasing a lunch box and bringing your midday meal with you. When you add up your savings on coffees and lunches you will be surprised at how much money you actually have left over to pay for those big purchases.
Look at Your Household Expenditure
A very simple exercise here can reveal ways of making significant savings. The most common mistake we all make is buying more than we actually need. It is conservatively estimated that a third of all food purchased ends up in the bin. Calculate on a weekly basis how much you are spending on food that goes to waste. To get a real picture of how much money you can save annually by cutting out that waste, multiply that figure by 52. The real way to save on your grocery bills is to always bring a shopping list with you. Without a list that accurately lays out what you need to buy it is very easy to be distracted by supermarket displays and end up with buys that will make their way to the bin.
Fortunately for the savvy shopper, today’s retail market offers a plethora of discount stores particularly in the household and grocery areas. Time was when these were viewed with distrust, but strict consumer laws guarantee that the products here, while cheaper, reach a high standard. The growth in the market share of stores such as Aldi or Lidl testify to that. And we now know that these stores keep their prices lower through reducing their own costs by having us, the consumers, do our own bag packing and by offering a “no frills” shopping experience.
One of the most expensive items for most people is the cost of regular nights out. A calculation of what these nights out cost can reveal startling savings on how much can be saved if regular nights out can be replaced by nights in (if friends can organise hosting the entertainment in their turns). With the range of online games and entertainment available the regular night out will become cheaper and could well be more entertaining.
Credit cards can be immensely useful but also immensely expensive. That is, if the bill isn’t paid on time, or in full. A check over past bills will quickly reveal how much your card may be costing in interest. In an ideal world we would all cut up those cards, but as life isn’t always ideal, the secret is to bring the credit card bills under control by reducing the amount of interest being paid and avoiding charges for late payment.
A quick calculation of where the money is going may call for changes in our spending habits. But that hour of pouring over bank statements and the calculator could well mean a healthier bank balance, more confidence in our ability to manage our money and some money saved for the big purchases everybody wants to make from time to time.