MONEY IS LIKE OXYGEN, YOU NEED IT TO BREATHE - PT.1
Do you often feel as if the money you have isn't enough? Here's some relatively easy ways on what you can do to ensure you have money for what you really want.
By Martina, co-founder of Bifrost – Aug 25 2018
Money is something which affects almost every corner of every one’s lives. All the things we use have a monetary value, whether directly or indirectly. It surrounds us and is necessary for our survival, just like oxygen, and without it, life is often difficult and painful. Money is a resource and it helps you acquire other resources, whether you want to maintain your health, expand your knowledge through education, or achieve a new skill. With a little bit more of it, a whole lot of opportunities may present themselves.
According to The Guardian, more than 6 million British adults believe they will never be free their debt, where the average Briton owes £8,000. This issue is highly related to a small or nonexistent savings account. The Independent found that a quarter of Britons have no savings at all, and one in ten spend more than what they earn.
We at Bifrost have outlined three relatively easy steps which can help grow your bank account
- Smart Spending
- Continues Saving
- Effortless Investing
This article has been divided into three parts, and in this first part we will be discussing smart spending, which will focus on how to think when spending your wealth and how to cut down certain costs.
Let’s dig into the first step, which relates to your expenditures. There’s a lot of different ways to spend your money, and there is a sea of items to spend it on. These items can be categorized, ranging from absolutely necessary, such as food, shelter and contributors to our health, to impulse purchases, such as a piece of clothing which will forever remain in the back of the closet after being worn once. If the latter purchase often occurs to you, then this part of the article is particularly relevant for you.
“Our range of options increase in relation to our wealth”
As a consequence of the wide range of options available to us, the way in which items are categorized is highly individual, and becomes even more so as our monetary resources increase. This is because our range of options increase in relation to our wealth. For example, food is something which everyone spends money on, but what grocery items or restaurants we choose to eat at varies greatly. Once more money becomes available to us, we might choose more expensive groceries and change the restaurants that we dine at.
Although the specific goods or services we choose to purchase are highly individual, the overall impulse purchases can be avoided. Spending in itself isn’t necessarily the issue, it is the thinking (or lack thereof) behind some purchases which is the problem. As portfolio manager, Kevin Mastaler, at Maclendon Wealth Management says:
“Spending smart should not be confused with spending less. Spending smart is making the most out of your money. It is the act of allocating your spending in the most efficient manner”.
Here are some tips on how you can become a more conscious consumer and spend your money wisely
- Save money on the small purchases, and do so often as it will eventually add up.
- Purchase quality items and services to avoid long-term high costs of replacing cheap goods over and over again.
- Beware of how people around you affect your spending habits.
Cut down on your small expenditures
Firstly, by saving money on a small scale at a frequent rate, through avoiding frivolous purchases and small daily expenses, you may see a boost in your overall budget. Perhaps brewing your own coffee rather than purchasing it at a café, refilling a water bottle, or going to a cheaper hairdresser who does the job almost equally as well for half of the price, may be the solution for you. Or you can identify non-essentials and cut them out right away, such as entertainment and dining out. Continuously ask yourself the questions: Is this a necessary purchase or just a temporary want? And can I get this product or service at a cheaper price? Consider the cost vs. labor by asking yourself how much time it would take to earn the amount of the item. Do comparison shopping and avoid acting on impulse.
Quality over Quantity
Secondly, there is a large emphasis on the importance of quality. A cheaper option isn’t necessarily a better option. While it may save you some money in the short term, it may become a large expense further down the line if it requires consistent replacement. For example, it may be worth purchasing a good pair of shoes which will last for decades, rather than going for a very cheap pair with a material which frequently breaks. Therefore, you must both keep in mind the first advice of looking for cheap options, but also consider the long-term cost. Not only does this save you money, there are other benefits to it as well; such as saving you time to do shopping, less wasteful, and is in many cases more ethical.
Don’t impress to success
Thirdly, notice how other people affect your spending. The average person spends far too much of their money trying to impress others, and 40% of millennial overspend to keep up with their friends. You may be familiar with Dave Ramsey’s quote: “We buy things we don’t need, with money we don’t have, to impress people we don’t like”. In fact, spending money on life experiences rather than material possessions is proven to increase your happiness, but research shows that this is not the case when the motives are to impress others. Forbes has outlined some advice on how to overcome this temptation, including setting a budget and cutting costs, as mentioned earlier.
By spending wisely, you will have more money at hand which can instead be put it into your savings account. Stay tuned for our second part of this series where we will focus on how to save money more efficiently and to do so at a frequent rate.
Click here for further reading on spending advice.