How Do I Cut Back on Spending?

Melissa Griswold, Ph.D.:

Start by defining and clearly outlining the difference between "needs" and "wants." Develop a budget that allows for both but keeps the "wants" reasonable and manageable. Track your spending and review your progress each month. Strive to improve, not to punish. If you overspent one month, forgive your mistake and make it up next month. Watch for unnecessary expenses that you won't miss. For example, subscription services or memberships are rarely used. Shop wisely and be mindful of the small yet repetitive purchases that can add up over a month. Cook at home and pride yourself on being a smart shopper! Save money when you can.

Jennifer Lee:

We all have automatic charges that we determined were worth it at some point. We agreed to a membership at a gym, nail salon, a subscription to National Geographic, The New York Times electronic version, etc. And we have annual memberships to places like Costco and fees associated with an American Express card. Little dribs and drabs that are sucked out of our bank accounts reduce our potential future net worth. We must start here. Take a look at your credit card statements and your debit cards to determine if these are expenses that you still choose to maintain. I emphasize the word choice. This is your life, and this is your money. Be intentional about how you spend it.

Christina Todd, CDFA®, CFP®:

Awareness and automation! It is easy to hit "buy now" on Amazon or through a promotion on social media. Instead, create a "shopping list" and, over time, decide if this is a purchase you need to make right now. Auto-draft as many bills as possible, as well as savings and create awareness of what you’re spending and where it is going.

Todd Mora:

Try to monitor your small discretionary purchases; research shows small impulse purchases are a major contributor to overspending. If you track your spending and are aware of how much you have spent, you will tend to reduce overspending just through awareness. Banks, credit unions and other financial institutions have online tools and apps that can help you monitor your spending.

Many financial institutions will allow you to set up alerts when you use your debit or credit card. I recommend turning them on at a low dollar amount so you will get more alerts, which will raise your awareness of your spending. One app that helps with your daily spending is Pocket Guard. A free version can help set daily spending limits based on income, expenses and savings.

Nate Hansen:

A simple way to cut down on unnecessary spending is to save any purchases that aren't 100% necessary for the last 5-10 days of the month. When you see something online that you want, make a note of it, but hold off on buying these items until the end of the month so that you know how much you've already spent that month. Then simply prioritize those unnecessary purchases to stay within your monthly budget.

Amy Rose Herrick:

Keep a diary of every penny you spend for at least one month, three months is better to spot trends. Look at each item purchased. How much does it add up to in a year? In 10 years? How many minutes or hours do you need to work to pay for it? This is how you prioritize spending.

For example, your take-home [pay] is $1,000 a week and you work 40 hours a week. This means a minute of work time is 42 cents. An hour of work time is $25. You spend $10 a day on coffee or soft drinks, 5 days a week. That is $50 a week, or $2,600 a year. You work 104 hours a year to drink coffee and soft drinks. Is it worth it to you to work 2.6 full work weeks to consume these beverages? Put another way, are they worth $26,000 in spending to you over the next 10 years?

With an extra $26,000 plus interest, if it were invested and not spent on just that one consumable drink, you could buy a car! You have many choices on where to spend your money. What if you decided to drink water 4 days a week and specialty coffee only once? You just dropped that cost by 80% over the course of a year without dramatically changing your lifestyle in just one area!

Jordan Patrick, CFP®:

Reviewing your transactions 2-4 times per year can allow you to identify where your spending doesn’t align with your values and ultimately allow you to decide what you want to spend money on and where you should cut back. Talk with a friend or your spouse, and ask questions like:

• What was the best thing we spent money on in the past three months?
• What would we like to spend more money on?
• What would we like to spend less money on?

Inbar Madar:

To spend money wisely, start by sorting your expenses into what you must have (for example, business licenses and taxes), what is nice to have, and what contributes positively to your business growth (for example, the CRM program you're using for a team-building event), and what's more of a luxury (for example, daily meal deliveries and a branded laptop). This helps you see where you can save. Negotiating for better prices and checking out what competitors offer can also save you a lot in the long run. By spending smarter, businesses can use their resources better and create emergency funds as well.