How to Spend Money Wisely? 8 Things to Do.
Spending is a huge part in our lives. In order to purchase larger items (a new house) or achieve long-term goals (study aboard), one needs to know how to spend his or her money wisely to have more freedom and flexibility in life.
In the following article, we are going to share 8 things to do for spending your money wisely (with XMind!).
1) Set a Saving Goal
A goal is the start of everything. What you’d like to achieve in the future determines how you want to live your life today. This rationale also applies to money. Many people have set their purchasing goals but often ignored the importance of saving goals.
‘I am going to save $20,000 in two years’ is better than ‘I am going to save some money this year.’ A good saving goal needs to be specific with amounts during a certain time period as well as within your reach. It can therefore act as clear guidance for you to save a certain amount periodically. So, to start spending money wisely, you need to have a detailed saving goal to motivate your saving behavior.
2) Keep Track of Your Spending
A VERY important thing to do daily, or weekly if you’re busy. You don’t realize how much you have spent until you receive monthly bank statements. And it can be a (sad) surprise.
Use an APP to keep track of every spending or take rough note of big purchases weekly. You will then develop an overall idea of how much you would normally spend in a week, better referencing for your saving plans. It is also an important preparation for 5) Rate Your Purchased Items, and 7) Categorize Your Spending.
3) Estimate Rough Spending on Necessities
A simple estimation helps inform you about the lowest amount of spending generated each month. Necessities include weekly groceries, health insurance fees, tuition loans, etc. Keep this estimation in mind to become sensitive with over-spending days and weeks.
4) Set a Monthly/Quarterly Budget
We just mentioned the lowest amount of spending on necessities, while a budget is about setting the highest spending amount. Set a budget in order to be mindful of over-spending or impulsive purchasing actions.
5) Rate Your Purchased Items
Rating your purchased items (excluding necessities) might sound strange and unnecessary, but I guarantee it’s worth a minute to quickly re-evaluate your purchase list. For example, if you decided to buy a new green bag out of impulsiveness and found out it doesn’t go with any of your clothing pieces. You might rate your purchase decision a score of 2 (out of 5), indicating that it was a bad decision and reminding you to wait the next time for consideration rather than buying something immediately.
6) Create a Wish List
Put items you want into a wish list. The purpose of a wish list is to hold off your impulsive spending desires. Write an item on the list, wait for a week, and go back again to see if you still want it that much. I ended up removing lots of the items from the wish list after holding off my desires for a while.
7) Categorize Your Spending
Categorizing your spending prepares you well for 8) Analysis, and it’s informative to be aware of how much money you’ve spent on each category. If you’ve over-spent on the Entertainment category this month, then it’s better to cut down some unnecessary hangouts with friends during the next.
8) Do Quarterly/Yearly Analysis and Review
An overall analysis for your quarterly/yearly spending is necessary. During time for review, you need to keep track of the progress towards your saving goals, make adjustments, and calculate the money spent on each category to examine everything holistically.
Thanks for spending time with us today! Learning how to spend money wisely not only makes you stay away from impulsive purchasing habits but also empower you to achieve long-term goals in life. Hope this helps, until next time~