When it comes to financial success, planning is key. We’ve talked about the importance of having a budget many times, and this strategy remains a critical element of most successful financial plans. After all, saving and investing only works if you plan it around your income and expenditures—it takes a bit of work, but it’s more than worth it in the end.
If you’re in the process of creating a household budget or looking for ways to reduce your monthly spending, here are five areas to pay particular attention to. For personalized advice, please reach out to our team—we’d be glad to hear from you.
Big car payments
Having a monthly car payment isn’t a problem—as long as you can afford it. Before you commit to buying a new vehicle, look at your household budget and confirm that you can make the corresponding monthly payment without compromising your ability to make ends meet. The ideal number for a car payment is often in the range of 10-15% of your monthly net income. If your current car payment is larger than this, consider reaching out to your lender to renegotiate the terms—or, if needed, trade your car in for a less expensive vehicle.
When deciding how much to spend on a new (or new-to-you) car, consider the size of your down payment (if applicable) and the repayment terms as these two factors will determine the amount of your monthly payment. In some cases, it may make sense to take out a personal loan with Interior Savings to cover the full cost of the vehicle rather than paying a higher interest rate elsewhere.
Online shopping
If you make online shopping a regular habit, it can eat up your budget in no time. It’s completely reasonable to make purchases online, of course—it’s convenient and you can often save money by shopping around for deals—but it’s also very easy to go overboard, lose track of your spending or shop out of boredom. To avoid this, challenge yourself to shop in person as much as possible and refrain from saving your credit card information on your favourite websites. If you see something you really want, email yourself the link and wait a day or two. Clear your search history to avoid seeing ads for products you looked at, and make a point not to shop from your phone while watching TV or being otherwise distracted. This will help you stick to shopping for what you need while avoiding impulse buys and overspending.
Subscription services
Monthly subscriptions are often inexpensive when looked at individually—$10 for that television streaming service, $6 for that news website, another $9 for music streaming on your phone and $20 for a retail subscription—but when you look at the collective cost per month, it may be a lot more than you realized. This is particularly true if you sign up for new subscriptions without cancelling old ones—before you know it, you’re paying for four or five media subscriptions (or more!) but only using one or two!
Take stock of your monthly subscriptions and membership fees (for example, your local gym or community centre) and make an effort to pare down the list. The savings will be immediate and in some cases, substantial. Consider this a budget-saver!
Going out often
A night out on the town is a lot of fun (and often well-deserved!) but when these social events happen on a regular basis, the costs add up quickly. Instead of saying yes to every event, set an entertainment budget and make a concerted effort to stay within it. This doesn’t always mean declining social invitations—instead, suggest an affordable restaurant, host a potluck meal with friends instead of dining out, or limit yourself to one drink at the bar after work. You can also meet friends for coffee instead of brunch or attend free local events like concerts in the park. And if you want to buy pricey theatre tickets or something else outside the range of your entertainment budget? Cut costs somewhere else in your variable spending to make up the difference.
Not being prepared for the unexpected
An emergency savings account or “rainy day fund” is a huge asset to individuals and families. Unexpected costs can and will occur—this is true no matter what your budget looks like—but in an ideal situation, you’ll be prepared for them. Make an effort to put aside a small amount of money in a high interest savings account each month. This way, when the bill comes for that car repair or new appliance, you’ll save enough money to cover some or all of the cost. Every bit helps—remember, even a small emergency fund is better than nothing. There’s nothing worse than paying huge amounts of interest on a credit card because you weren’t prepared for an unexpected expense! Plan ahead now and you’ll thank yourself later—trust us.
If you have questions about your budget or financial plan, please contact us. An Interior Savings advisor would be happy to offer personalized guidance to help you make the most of your money.