Outside of acquiring an extra job or creating a means for increasing your income, reducing discretionary spending can help tremendously with personal debt management. Many individuals are in and out of their financial danger zones and manage by changing their discretionary spending habits. To better manage your finances by altering your discretionary spending, the following tips are advised.
Make a List of Your Spending Habits
Review your spending patterns by keeping track with a list of how you spend discretionary funds each day for at least a few weeks. You may not be aware how much several small purchases (e.g., coffee, snacks, newspapers, lunches) add up over time. Begin by listing nonessential (optional) expenses and assessing the patterns (eating out, trips, entertainment).
Also, make a list of your monthly and annual obligations so that you have these in mind as upcoming payments along the way. For instance, monthly payments may include credit card payments in full, utilities, rent, etc. Annual expenses may include insurances (auto, home, life, tenant), license plate stickers, taxes, etc.
Consider How You Might Reduce Spending and Save More
Estimate the savings that could result from reducing your spending, even if only for a short period. Before buying, ask yourself, “Is this something I want (optional) or need (require)?” This is an important distinction and you can put a note or sticker on your debit or credit card as a reminding question. Much self-discipline is needed by all to avoid over spending.
Here are examples of how you can reduce your overall discretionary spending:
Postpone Purchases where Possible, Especially Large Purchases
It is a societal norm to “buy now and pay later,” especially since the onset and ease of store credit. If you have decided that the item is something you need, then ask yourself, “Do I need to make this purchase now or can it wait? Is there a benefit to waiting?” If you can temporarily delay expenses, especially major purchases such as a new vehicle, furniture, home upgrades, computer, phone, or home theatre system, then you may be able to reach your cash reserve goal. The plan is to simply postpone these purchases, and waiting can often result in an increase in the level of enjoyment had from a later, debt-free purchase. Waiting can also result in buying a better product or reduce your desire to purchase a particular item.
How you choose to use your discretionary spending is a matter of making wise personal choices. Cutting back today can be expected to pay off in the long run. The best method of managing your finances is one that works for you. Reducing discretionary spending is just one component of doing whatever it takes to be successful and debt free!