Did you know that 90% of people don't notice how they spend a third of their income? Agree, you have had a situation where at the end of the month you look into your wallet and cannot remember what exactly you spent the money on. As a rule, these funds are spent on minor impulsive purchases that bring you nothing but unnecessary expenses. But these funds can be used more rationally. Next, you will learn practical recommendations on what you can spend your money on with real benefit.
Educate yourself
One day a famous businessman and entrepreneur was asked: “What is the best way to spend money?”
The answer surprised many. He said the best thing to do is invest in yourself. That is, educate yourself. Frequently attend various trainings, courses and seminars that are relevant to your work or hobbies. Read more literature. This is the most profitable investment you can make.
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How to spend money correctly
I consider myself a lucky person because by nature I don’t really like to spend money and I think carefully about the necessity of every big purchase. This has both obvious advantages and certain disadvantages - sometimes I put off purchases for too long, the benefits and necessity of which can only be fully understood after the purchase. So, for example, it happened with a modern smartphone - I was fine without it, but when it appeared, the high speed of operation and the convenience of various applications became a pleasant discovery. You quickly get used to something good 
However, the basic rule for spending money wisely looks like this:
No impulse purchases! Emotions often get in the way of putting thoughts together. Sometimes you see something like this and it’s difficult to refuse to spend money. Or, for example, there are bad periods in life when your mood is low and you want to somehow pamper yourself. In both cases, the result will be the same - emotions after the purchase will quickly subside and the question will hang in the air: “Was it worth spending the money on this?” It's a shame if the answer turns out to be negative. To prevent such situations from arising, you need to learn to restrain yourself and approach the issue of large purchases responsibly and think about how to rationally spend money in this case.
In principle, the same applies to small regular purchases in the store. While you are walking to the desired department, it is easy to be swayed by the beautiful appearance of the goods and fill a whole basket of unknown items, if you do not make a shopping list .
I go to the store with approximately this shopping list when I want to cook one of my favorite dishes - okroshka. Now is the season!
Why is it better to purchase according to a pre-prepared list? It's simple: it's much easier to make a list of what you need at home, where there are no distractions. In the store, various products in beautiful wrappers look at you from all sides, but with a list you know that all of them are not needed at the moment. Of course, you can forget about something, but the chances of buying something unnecessary become much lower. Even if you want to buy a product that was not on the list, a switch will immediately go off in your brain - “Is it really worth taking?”
Websites and applications: Buy a loaf!, Google Keep, Evernote. Evernote notes are enough for me, but you can and should use specialized applications like Buy a Loaf.
Go ahead. Do you often have the feeling that money runs out too quickly or simply disappears in an unknown direction? This happens if you don’t keep track of income and expenses . You probably know about its benefits, but it’s quite possible that you ignore it out of laziness. But accounting allows you to learn so many useful things:
- what exactly is the money spent on?
- which categories of expenses take up the most funds;
- from what sources does the money come?
- Are you getting richer (does your income exceed your expenses?)…
And much more. The most important thing that accounting can provide is an understanding of which expenses are necessary and which ones can be avoided (by the way, investors are well acquainted with cash flow accounting - without it they cannot even say how much they have earned). For example, the costs of various unhealthy foods (fast food, cola/fanta/snickers, ketchup/mayonnaise, etc.) can always be eliminated quite painlessly. If you apply willpower, you can achieve even better results: for example, giving up bad habits will lead to significant savings in money.
Websites and applications: Homemoney, MoneyLover, Paymaster.
I have Paymaster on my smartphone - the subscription is inexpensive, only 120 hryvnia (about $5) per year, all the necessary functions are in place. There are plans for a large review of financial accounting applications, so subscribe to updates on the Webinvestor Blog!
Thinking carefully about big purchases, shopping with a list, and keeping track of expenses are key tips for spending money wisely. However, all this requires some effort on oneself. Is it possible to start with some simpler method?
Use the “pay yourself first” principle, in other words, set aside part of your salary as soon as you receive it . This is the easiest way to save, since part of the money will remain with you no matter what. The main task is to meet the reduced budget. In my opinion, this is easier than forcefully excluding some expenses. To begin with, put aside 5-10% to get used to it, later you can increase this percentage.
See how much money you can save in 5 years this way:
How savings grow if you save 5%, 10% and 20% of your salary every month.
That's a pretty good amount of money, isn't it? By saving 20% of your salary for 5 years, you will collect an amount on which you can live for a whole year! And this does not take into account any form of reinvestment of income.
Saving money is half the battle; then you need to figure out how to properly spend the money that you have accumulated. What to do with the saved money, how to properly spend it further and should it be spent at all? your emergency fund with their help . This should be a reserve of cash (knowing our banks, it is better not to store important savings in them), which will be enough for you to live for 6-12 months in case of job loss or other troubles.
Perhaps, only after replenishing your reserves is it worth thinking about how and what to spend the saved money on. Here you yourself must decide whether to improve your quality of life through large purchases or make money make money through passive income options.
Friends, I’m interested to know which of the above methods for wisely spending money do you use? A small opinion poll, so to speak. Please select the required items from the list (several are possible):
Let's see how developed good financial habits are among readers of the investment blog . However, the ways of rationally spending money do not end there: in addition to cutting the budget and eliminating unnecessary expenses, you can use other various saving techniques.
Invest funds
Investing finances in order to further increase your capital is one of the most rational options where you can spend money with real benefit.
Look around you - you will see a lot of opportunities on how to make financial capital work for you and bring in even more money. Free investment training:
The free course “Investing Basics for Beginners” is available in the Tinkoff Investments application >>>.
Author: Alexey Piven
Smart Spending Techniques
If you are not satisfied with the cost control method I proposed, then I have collected several popular techniques for you.
Envelope technique
There are 4, 6 or 7 envelope techniques. You decide the quantity for yourself. The point is the same: you need to create several envelopes, each intended for specific expenses. Divide your costs into categories, determine what share they will occupy in the total amount. On the day your salary arrives, immediately put the money into envelopes and for a month, take only from the envelope that is intended for specific expenses.
I’ll tell you using 6 envelopes as an example:
- Mandatory expenses - food, household needs, utilities, health, etc. Let's say the share is 50%.
- Education – payment for kindergarten, clubs, online courses, tutors, etc. Share – 10%.
- Entertainment - cinema, museums, cafes, exhibitions, etc. Share - 10%.
- Large purchases that cannot be purchased immediately, but can actually be accumulated over several months. Share – 10%.
- Vacation. Share – 10%.
- Investments. Share – 10%.
At the end of the month, transfer the remaining money from the first three envelopes to the last ones. Let's not forget about inflation. If you are planning a vacation only in a year, then you should not keep the money in an envelope; it is better to put it on a debit card with interest on the balance or savings account. The same goes for investments. You can save for a year in the same place as vacation money, and then invest in more profitable instruments.
Method 50/30/20
We divide expense items into 3 categories:
- Current mandatory expenses are food, clothing, communications, utilities, etc. We allocate 50% of the money received for them.
- Savings – investments, vacations, large purchases. Let's use 30% of our income for this.
- Unnecessary expenses - entertainment, buying desired but not very necessary things. Let's set aside 20%.
This method does not replace the need to work with the tables that I showed above.
Budget for 1 day
The technique is for those who cannot control their expenses, spending half their salary in 1-2 days, and then eating short bread with bread for the rest of the time until the next income.
The point is this. You need to divide the money received at the beginning of the month by 30 or 31 days. Spend exactly as much as you should on that day. Spent less? Amazing! The remainder can be carried over to the next day or put into a piggy bank. Spent more? The next day you cut your budget by this amount spent.
Technique for dividing expenses by week
On the day the salary is received, we set aside for obligatory expenses. Before this, you should find out the share of such expenses. The daily monitoring table that I showed above will help again. Let’s say you spend 60% per month on mandatory expenses. We divide the remaining 40% into 5 parts. We spend four of them weekly on unnecessary expenses, the 5th part is used for 2-3 days (in a month there are not 28, but 30 and 31 days) and savings.
This method is similar to the “1-day budget” technique, but softer, because you do not need to strictly control expenses every day, but only need to adhere to the weekly distribution.
Do it yourself
Instead of paying a specialist to repair your apartment, break down appliances or plumbing, solve the problem yourself. A service is convenient and profitable when it helps you with something you can’t handle. In other cases, you are essentially trading your free time for money you have saved. In the future, it will be nice to say “thank you” to yourself for this.
Rest
Passion for what you love is great, but you can’t just work. As you know, work must be alternated with rest. You don't have to go far from home to do this. If it is not possible to give yourself a long break, take a week of vacation or a couple of days off and have a complete relaxation. Go to the cinema, swimming pool, skating rink. Allow yourself to have breakfast in a cafe and lunch in a restaurant. Splurge on tickets to the opera or philharmonic, or maybe to a concert of your favorite rock band. Visit exhibitions. Changing your lifestyle is sometimes more effective than treatment in a sanatorium. How much will it cost? Who cares, after all, you earn money to pamper yourself.
House
The house should be cozy, so that you want to return to it every evening. A house is like a living being. He is also sick and getting old, and we must maintain him in decent condition. Because home is our projection. It’s bad for him – it’s uncomfortable for us too.
Take a master's look at your home - what needs replacing? Maybe the windows need to be replaced? To prevent heat from escaping through the cracks in winter. Or maybe it would be advisable to install new entrance doors. After all, this is the calling card of your home.
Sometimes it is enough to hang new curtains or abandon them altogether, replace the chandelier or buy a new table lamp to make the house sparkle with new colors. But if serious repairs are needed, don't delay. Believe me, old plumbing, poor electrical wiring, dirty walls have a bad effect on the life of the owners and do not contribute to their well-being and success. Meanwhile, a clean, fresh home gives strength and feeds with positive energy.
Pay the required payments
As soon as you receive money, you should immediately set aside to pay your obligations. Almost every adult has them, I will comment on them separately below.
Mandatory payments are those that you cannot avoid. For example, you cannot not pay for utilities, otherwise you will be evicted from your home. You cannot fail to pay your loan, otherwise the bank will send debt collectors to you.
Loans
If you have any debts, you should know exactly how much you need to pay off each month. And immediately set aside this amount to avoid problems and difficulties.
If you think that after paying off the loan you will have nothing to live on, contact the bank and tell the bankers about it. For long-term loans, such as a mortgage, the bank can usually reduce the interest rate and extend the term. Or to meet you halfway in some other way.
The bank wants you to pay. Even if in smaller volumes and for longer, they paid.
Communal payments
The advantage of utility bills is that their volume is almost always known in advance. When you have lived in an apartment or house for a year, you will know how much you have to pay on average in the summer and how much in the winter, when the heating is on.
Set aside the required amount for utility bills so that you can “forget” about it and not worry.
Major renovation
Its amount does not change at all. You can not only allocate this amount from your salary in advance, but also set up automatic payment on your bank card. Then the money will be transferred for major repairs automatically and without your participation.
Payment for Internet and mobile communications
I pay for Internet and mobile communications 750 rubles per month. I have a fixed tariff, under which I get 500 minutes for calls and 500 free SMS, this is quite enough for me.
If you have a similar fixed amount, immediately allocate it from your salary to pay. Or set up automatic payment, as in the case of major repairs.
If Internet and communication costs are not fixed, go to your personal account on your operator’s website and see how much traffic you usually spend and how long you talk to people. And set aside the required amount.
That's it, we're done with the mandatory payments. These were their main categories; if you have any other obligatory payments, also “provide” them with money at the first “receipt”.
Determine your budget
Expenses should not exceed income. So know how much you earn and spend. Keep track of your purchases and make daily entries in a spreadsheet. Excel or special mobile applications are suitable for this. Over time, you will see how your funds are spent every day, week, month and year.
A budget will help you analyze your personal financial situation and pinpoint the holes into which money is flowing.
Maintain discipline. Before every purchase, think about how necessary it is now and whether it will be relevant in a week. This technique will remove the most obvious financial “mistakes”.
Taking care of your health
Investment in your health is one of the most effective. Modern civilized people differ from others in that they are regularly examined in good clinics. And they visit the dentist at least once a year. Timely identified sores are known to be treated faster and more successfully.
Do not spare money on good pharmacy vitamins and microelements. Although the attitude of doctors towards them is ambiguous, they say that synthetic drugs are poorly absorbed, many of us are convinced from our own experience that in the cold season these drugs still support the body.
But taking care of your physical fitness is not limited to just preventive visits to the doctor and taking expensive vitamin complexes. Sports activities are also included in this list. Find a good sports club or fitness center near your home, or maybe a dance school. However, you can improve physically at home or in the park, but then you will still need sports equipment and beautiful equipment.
Cloth
Too much clothing is bad. Because it doesn’t fit in any closet and because there’s nothing to wear anyway. Your wardrobe should be composed of basic things: jeans, several white shirts and thin jumpers, a pencil skirt, a sheath dress, a jacket and 5-6 T-shirts. And also a couple of jackets, a raincoat and a coat. Well, shoes for the season. Don't waste your money on this. Good quality items will serve you for a long time and help you create an elegant look. Which, by the way, is important during an interview.
Set a savings goal
Regardless of what you're saving money for, set it as a clear and measurable goal. For example, buying an apartment, a car or going on vacation. Having a firm idea of where the money is being saved allows each person to work on the task more focused and efficiently.
Once you determine your goal, create a plan (personal map) that will help you get to the finish line. This “route” determines how much money you should save each month, taking into account your income and basic expenses. Planning will protect you from overspending.
Hide your credit cards
Credit cards can be a person's worst enemy when trying to save money. Try to put them out of reach. For example, a safe. Of course, there are no obstacles to getting the card back from there. But the essence of this technique is to slow down the interval between the moment when the idea to spend money comes to mind and the moment when you are already holding the card in your hands to pay. The conditional obstacle reminds you why you hid the card, and subconsciously suggests that taking it now and inflating the costs is a bad idea.
Find out the real cost
When you want to make a purchase, check its “true cost” for yourself. Calculate how long it takes to earn the money needed for this purchase.
For example, if you earn 300 rubles per hour, and you need 1,500 rubles for a purchase, you spend five hours of your work on it. Converting your cash price to an hourly rate this way helps protect against spending that you might regret in the future.
Read: What skills to improve to become financially successful
Attitude to money
The value of money is quite conditional and depends on the standards of each person. To determine the degree of value of monetary resources, it is necessary to make certain calculations:
- calculate the cost of one hour of work;
- learn to quickly calculate the number of things that can be purchased in one month;
- calculate the cost of one use of a thing.
On a note! It will be useful for everyone to learn how to calculate each working hour. When the cost of one hour becomes known, it will be possible to look at things differently.
If a dress costs five hours of labor, maybe it doesn't need to be purchased for that amount if buying it won't fundamentally change anything.
The number of possible purchases is also easy to calculate. An iPhone that costs as much as your salary won't be a good idea. This may lead to the need to borrow money.
If a thing will have to be repaired sooner or later, you need to think about whether there is enough money to repair it. The best option is to buy a gadget that fits more than three times into your monthly budget and will last a very long time.
Changing your attitude towards finances will help you learn to save and save money.
Limit your desires!
We all have dreams and we all want them to come true! But you should always soberly assess your capabilities before trying to make your desires come true. A striking example is a wedding. Young people 20 years old, who have not yet graduated from college and live on their parents’ necks, are planning to get married. They want a lot of guests, a limousine, a gorgeous photo shoot and a luxurious banquet. And where do you get all this from if the parents have average income on both sides? And so they get into debt and loans themselves, drag their parents into this adventure, and all in order to pay it all off in one day and pay off the loans in subsequent years.
But it would have been much easier to organize a small family evening, and spend all this money, for example, on a down payment on a mortgage - a young family would really need an apartment!!! And this is how you need to act in everything and spend your money correctly. Analyze what you can refuse. What do you buy or consume that you can easily do without or replace with a cheaper analogue. For example, stop smoking, give up unnecessary chewing gum, stop drinking beer every evening, etc. You will be amazed at how much money you spend on desires and weaknesses that seem so small.
Getting rid of conspicuous consumption
What do you think about when you look at a billboard with a message like “Credit for a smartphone”? Financial literacy experts “shudder with horror” or “boil with rage” – there are also more emotional assessments. Some even propose banning such services, or at least their advertising, as promoting living beyond one’s means and irresponsible financial behavior .
The latter, of course, is too much: it is possible to reach an agreement to limit the civil rights of shopaholics and sweet tooths, not to mention citizens who abuse alcohol or are interested in the opposite sex.
But there is a problem, sociologists have been sounding the alarm for a long time: Russians are too prone to conspicuous consumption, to luxury - we are not talking about fur coats, diamonds, sports cars and yachts. We are talking about consumption that does not correspond to income and is not designed to satisfy reasonable needs. It's about consumption, the sole purpose of which is to show: “Look, I'm cool!” And a smartphone that costs a salary, or even two or three, is far from the only example of this kind.
The problem is divided into several:
- Unreasonably expensive purchases divert resources from truly pressing needs. “Well, I’ll live on pasta for a month and do without fruit”...
- The illusion of one’s own well-being is created , thereby reducing motivation for professional and career growth
- Expensive things often mean expensive service .
A friend of mine has not been able to repair the Swiss watch that was once given to him for many years now - the repair will cost 15 thousand rubles, and there is always a better use for this money. However, it might be worth doing - once upon a time they greatly simplified complex negotiations by accurately indicating his status and income level. For approximately the same reason, he stubbornly refuses a more expensive car, although he could afford it. By the way, if the watch or car were more expensive and did not correspond to income and social status, negotiations would be more difficult or simply unsuccessful. Too expensive things often cause confusion or suspicion among partners and employers.
Conspicuous or status consumption often contributes to excessive debt. And, accordingly, the subsequent “irritation” in personal finances.
It comes to jokes. At the height of the credit boom, in 2012-2014, the “wedding loan” began to gain popularity in many regions, with terms and amounts reminiscent of a mortgage - except that the rate was higher. The lavish weddings apparently made an impression on friends and relatives, but long-separated couples also pay for it, for them this is another reason to hate each other.
What they don’t save on
They don’t skimp on nutritious food or inexpensive pleasures. You should not drink instant powder instead of elite coffee.
On a note! You need to live fully. Take care of your health, play sports, sometimes drink tea in an inexpensive cafe, buy educational toys for your children, give gifts to relatives and friends on their birthdays - all this is necessary for a normal life.
We should not forget about going to cultural events. There is no need to impoverish your inner world for the sake of an extra saved thousand, since we only live once and life without pleasure has no meaning.
