‘Do not save what is left after spending; instead, spend what is left after saving.’
How do you follow this advice from uber-investor, Warren Buffet? We’ve put together this A-Z list to show you exactly how.
Why you should save before spending
Prioritising saving over spending is crucial for achieving long-term financial stability and peace of mind. By setting aside money each month before making any purchases, you build a financial cushion that can protect you from unexpected expenses. Having this emergency fund in place will reduce stress and improve your overall well-being.
Then you can channel additional savings into investments to accumulate wealth and start working towards your financial goals.
This disciplined approach not only curbs impulsive spending but also ensures that your future is secure, allowing you to enjoy life without the constant worry of financial uncertainty.
If that sounds good to you, here’s the A-Z of how to do it!
How to spend less and save more
A – Automate saving
Set up automatic transfers to your savings account so you consistently save without having to think about it.
B – Budgeting
Create a detailed budget to track your income and expenses, helping you control your spending and identify areas to cut back.
C – Compare prices
Whether you’re buying insurance, a phone subscription, or a new TV, always compare prices from different providers or retailers before making a purchase to ensure you’re getting the best deal and not overspending.
D – DIY
Instead of paying for services or products, try doing things yourself, like cooking at home, making gifts, or doing minor home repairs.
E – Eliminate unnecessary subscriptions
Cancel subscriptions you don’t use or need, such as streaming services, magazines, or gym memberships.
F – 50:30:20 your life
The 50:30:20 approach to finances advocates spending 50% of your income on needs, 30% on wants, and 20% on savings.
G – Growth mindset
Mindset is everything when it comes to finance. A positive outlook on money can help you avoid pitfalls like fear-driven decisions and instead, focus on consistent, goal-oriented actions to build long-term wealth.
H – High interest
High interest rates reward savers, but when applied to debt, they can be a serious burden, leading to higher repayment costs and financial strain. Make sure you are using compound interest as a friend, not foe.
I – Invest wisely
While your emergency fund should be easily accessible, invest the rest of your savings in funds or other investments to optimise your return.
J – Justify every purchase
Before buying anything, ask yourself if you really need it and if it aligns with your financial goals.
K – Keep track of expenses
Regularly review your spending to see where your money is going and make adjustments as needed.
L – Long term focus
Compound interest needs time to work, which is why you need to treat financial planning as a marathon, not a sprint, focusing on the long term.
M – Markets
Over the long term, stock markets offer the best opportunity to build wealth through capital appreciation, often outpacing inflation and other investment vehicles over time. Don’t dismiss them as too risky.
N – No-spend days
Challenge yourself to have no-spend days where you avoid spending any money for a day.
O – Optimize energy use
Reduce your utility bills by switching providers, using energy-efficient appliances, turning off lights when not needed, and adjusting your thermostat.
P – Pay off debt
Focus on paying down high-interest debt quickly to save on interest payments and free up more money for saving.
Q – Question impulse buys
When tempted by an impulse purchase, wait 24 hours to see if you still want or need it.
R – Refinance loans
Look into refinancing your mortgage and student loans, or consolidating other debts at a lower interest rate to reduce your monthly payments.
S – Set SMART goals
Establish clear financial goals to stay motivated and track your progress towards achieving them. Make them SMART.
T – Track your progress
Regularly monitor your savings and spending to see how well you’re sticking to your goals and make adjustments as necessary.
U – Use cash instead of cards
Pay with cash to make you more conscious of each purchase and limit overspending.
V – Value quality over quantity
Invest in higher-quality items that last longer, even if they cost more upfront. This will save you money in the long run.
W – Work with an adviser
Working with a financial adviser brings numerous benefits that will boost your efforts to spend less and save more.
X – eXamine bank fees
Review your bank statements for unnecessary fees, and consider switching to a bank with lower fees or better services.
Y – Yearly financial review
Conduct an annual review of your finances to assess your progress, reset goals, and plan for the year ahead.
Z – Zero-based budgeting
Create a zero-based budget where every dollar is assigned a purpose, ensuring that your income minus expenses equals zero.
This A-Z guide offers a comprehensive approach to saving more and spending less.
Incorporate this advice into your financial planning and watch your wealth grow!
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