Save or Splurge? When It’s OK to Treat Yourself

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Author: Mary Kremer

Are you having trouble reigning in your spending? Or maybe you’re like many of us and just have no set monthly budget. You don’t know if you have a spending problem because, frankly, you don’t pay much attention.

Most people aren’t shopaholics. They don’t drop a couple hundred dollars without thinking about the consequences. However, many of us will spend ten dollars here and twenty dollars there and not realize how quickly our splurges add up. Thankfully, keeping your spending habits in check is as simple as becoming more aware of how you spend.

Here are some tips to help you create a simple budget, set some savings goals, and still have money for fun this summer:

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Take a Look at Your Current Situation

Before you make any changes, you need to know what your current spending habits look like. Go through your bank statements for the last month and ask yourself:

  • What charges are recurring? Do I have monthly subscriptions? How much do they add up to?
  • How much money did I spend on fun (and secondary) activities? (i.e. restaurants, shopping, movies, coffee breaks, etc.)
  • How much money did I spend on unexpected expenses? (i.e. car troubles, necessary clothing, medical expenses, etc.)

Now, add all of these charges up. If you can, go through the past several months so you can get an idea of the average amount of money you spend on non-necessities every month. Currently, what percentage of your income is spent on these kinds of expenses?

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Create a Simple Budget

Now that you know what your situation looks like, it’s time to create a basic budget. Though there is always a little flux in every monthly budget, you can create a framework to give you an idea of how much you should be saving/spending. Sit down with your bills and pay stubs and:

  • Deduct your primary expenses (rent/mortgage, utilities, car payment, medical expenses, gas and groceries, daycare, etc.) from your monthly income
  • Deduct 10-15% of your income and put it into savings
  • Take 3-5% of your income (if you have that much left over), and devote it to “fun money” and miscellaneous expenses

If you have excess money after this point, consider putting a little more money every month toward paying off any debts you currently have. Or, you could take a portion of the money and create a second savings account specifically for unexpected expenses, or even vacations.

Know How Much You Can Spend

Once you’ve got a basic idea of how much you should be spending every month on little splurges, compare it to what you’ve spent in the past. If there’s a significant difference between the two, you’ll need to pay extra attention to cutting down where you can. To help you out:

  • Cut down on unnecessary expenses. Take a look at your current subscriptions and memberships. Do you need Netflix and Hulu and Amazon Prime? Though cheap, those costs can quickly add up every month. Pick one or cancel them all.
  • Divide up your monthly “fun money” into weekly allowances. Take this money out in cash and carry it with you instead of using a credit card. This will help you keep track of your expenses.
  • Let your friends know about your goals. If you have a weekly lunch date with your friends and your budget only allows for a monthly lunch date, tell them that. You’ll likely be able to find another activity that will cost less and still bring you all together. It pays to have a little social support when you’re changing your habits.
  • Decide if you’d like to have a big goal to work toward (like an end-of-the-summer vacation), or if you’d rather have a monthly amount you’re allowed to spend on yourself.

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Set Some Goals

Make a summer’s saving plan. Looking at your proposed budget, decide how much you would like to save every month. Set some goals (they don’t all have to be boring) on how you’d like to use any excess money. Think about a few of these options…

  • Do you have credit card debt or student loans? Create a payment plan to make some headway with that debt this summer.
  • Is there somewhere you’ve always wanted to visit? Create a vacation savings plan and work toward going somewhere great at the end of the summer.
  • Would you like to move into a house by the end of the year? Or maybe it’s a newer car you’d like. Start saving for a downpayment.
  • Are you in over your head? Meet with a professional like Rulon T. Burton to discuss your options for financial recovery and set some goals together.

Once you’ve decided on a few goals, set a monthly amount you’d like to achieve. Then, reward yourself every month if you’ve reached your savings goal. This can be as simple as eating out or doing some shopping, or you could be frugal and rent a movie or give yourself a pedicure. The key is to make your savings fun.

Have Fun

Setting and achieving goals (especially financial ones) can be extremely liberating and, dare I say, fun? When you know where your money is going, you don’t have to feel guilty for spending money on yourself. So, take a little time to sort things out this summer and have some fun doing it. You’ll thank yourself and your checkbook will thank you, too.

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