Money & Career

How to spend less money

©iStockphoto.com/David Franklin Author: Canadian Living Credits: ©iStockphoto.com/David Franklin

Money & Career

How to spend less money

If you've ever been in debt, struggled with making (and sticking to!) a budget, or never seem to have enough money to pay your bills each month, you're not alone. With debt levels continuing to rise, it's clear that many Canadians are finding it difficult to spend less money.

We all know what we have to do in order to spend less money and save more money -- like cut down on variable expenses, increase our income and create a budget. But according to a recent survey by the Canadian Payroll Association (CPA), almost half of Canadian workers are unable to save just five per cent of their net pay; so how many are actually putting that knowledge to work?

The best way to ensure that you spend less money and save more money is to learn how to pay yourself first. This strategy might be considered an old personal finance rule, but it's also one of the most effective.

How does "paying yourself first" work?
When trying to save more money, most people attempt to save whatever money is left at the end of the month. The flaw with this method is that there usually isn't any money left over to save.

When you pay yourself first, you set aside a portion of your income to save before you spend money on anything else. So before you buy groceries, before you pay your rent, before you put gas in your car, the first bill you should be paying is to yourself.

By paying yourself first, you're taking action and showing that your future is the most important thing to you. With regular contributions to your savings, you will have created the opportunity to deal with emergencies in cash, pay for a down payment on a home, go back to school or save for retirement.
Why is paying yourself first so effective?
The method of paying yourself first works so well because it's simple: You will spend less money because you have less to spend.

So many people believe that developing the habit of saving money is impossible. But you don't have to start by putting hundreds of dollars every month into your savings. Start small and work your way up as your income increases.

Almost everyone can save at least one per cent of their income, so if that's all you think you can afford, start with that. Then, as your income increases, or when you find ways to trim other expenses in your budget, try increasing your savings rate to three per cent or even five per cent, and go from there.

Spend less money, save more money
If you've never saved regularly before, the best way to make savings a habit is to set up automatic deductions. Start by logging on to your online bank account and set up deductions to be taken from your pay cheque before you get a chance to spend it. Because the transfer is automatic, you will never forget to manually transfer the money, and you won't be tempted to spend it either. It's hard to miss what you never had to spend!

When you decide to pay yourself first, you are creating sound financial habits that will stay with you for the rest of your life. The ability to save more money can be challenging, but by having money in the bank, you are creating both opportunity and stability -- and a better life for yourself and your family.
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Money & Career

How to spend less money

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