3 Simple Tips to Help You Spend Less and Save More

Improving your financial health - spend less, save moreThe key to most financial plans is directing more money into savings, debt repayment and investments. Not surprisingly, this is also the hardest part of turning a financial plan into action.

If spending less and saving more was easy — everyone would be in great financial shape. Not to worry though, here are three practical MoneyFit tips that will help you reduce your spending and increase your savings.

Pay yourself first
This is probably one of the most quoted personal finance tips around. In fact you’ve likely heard or read this phrase dozens of times. But there is a reason for that – it works. It is the single most powerful tool to improving your financial health. Paying yourself first means making sure that your contributions to savings, investments and debt repayment are automatically made as soon as your pay cheque hits your account. This can be done by setting up automatic transfers and payments from your account on payday or as soon after as possible.

Pay yourself first.By doing this, you ensure that your most important priorities are taken care of before you get a chance to find other ways to spend your money.  Paying yourself first overcomes the two biggest challenges people face when trying to save. The first challenge is having to make the choice to put money away for some future goal when faced with the immediate gratification of spending today. By paying yourself first, you don’t have to make this very hard decision; it’s made for you automatically each payday. The second challenge is having to budget. Very few people can actually make a budget and live within it week after week, month after month. Many people find that if they plan to save what’s left at the end of their budget period, they end up putting nothing away. Rather than spending first and (maybe) saving later, paying yourself first means saving first and then being able to spend the rest without worry.


Think about costs, not just pricesEconomists have this wonderful phrase “opportunity cost” which they use to describe the value of something in a situation where a choice needs to be made between various options given limited resources. So for example, imagine you have $10 in your pocket and you have a choice between going out for lunch with your co-workers or taking a cab home after work rather than walking 5km in the middle of January. You only have $10 available to you so you must choose one or the other, you can’t do both. If you choose to go out for lunch, then walking home in the bitter cold is your opportunity cost. If you choose to take a cab home, then your opportunity cost is the pleasure of your co-workers’ company at lunch time.  Because your money is limited, every decision to spend comes with some opportunity cost. Rather than thinking about the price of your purchase in the abstract, thinking about opportunity cost helps you put the value of that purchase into context.

Price vs. costSome people like to think about purchases in terms of the amount of hours they’d have to work to pay for something. For example, if your after-tax income is $10 per hour, then the opportunity cost of that $200 dollar pair of designer jeans is 20 hours of work.

Other people like to think about purchases in terms of things they won’t get to do or buy. For example, that daily $5 you spend on a coffee and muffin before you get to work has an annual price of $1,300. Depending on your priorities, the opportunity cost of those purchases might be a week’s vacation at a tropical resort or that new TV you’ve been hoping to buy.

Either way, seeing opportunity costs helps to remind us that our dollars are limited and that every purchase is a decision. Thinking about the things we’re giving up to make a purchase is a powerful way to curb unnecessary spending.


Keep track of your spendingI’m sure you’ve heard this one as well…usually in the context of comparing your actual spending with what you’ve budgeted. But even if you don’t have a budget, keeping track of where your money goes can be an excellent way of reducing your spending in the long run.

Today, most of us use plastic to make our purchases rather carrying actual cash. While this is really convenient and more secure, it dramatically reduces our sense of how much we spend. Most of us don’t keep running totals in our heads from purchase-to-purchase, meaning we don’t know how much we have left. This disconnect makes it easier for us to overspend. By keeping track of your spending, you are less likely to spend more than you can afford.

Tracking SpendingKeep track of your spending also reveals some pretty interesting facts about purchasing habits. Most people are amazed at just how our “small indulgences” add up. You’re not likely to change an expensive habit if you aren’t aware that you have it or how much it actually costs. Keeping a eye on your spending helps you find your Timmie’s Factor  — that is to say, the small, regular purchases you can avoid to save a big amount in the long run.

Tracking your spending can be as simple as saving your receipts and spending a few minutes at the end of the week to add everything up. You can also use cool new online services such as to automatically track your purchases. Whatever way works best for you, regularly tracking and reviewing the money you spend will help you direct more of your hard-earned dollars toward your financial goals.

I know saving can be hard, but these three simple but powerful tips will make it a bit easier. What tips and tricks have you used to help reduce your spending or increase your savings?

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