Establishing A Spending Pattern

In order to spend wisely and save for the proverbial rainy day, the first step is to establish your spending pattern. Where is your money going? For a period of at least one month, track every single penny that you spend by writing it down in a notebook, on a spreadsheet on your computer or whatever works best for you. Keep your receipts to help you remember the date and the amount and items purchased. This may seem tedious, but it's critical to understanding exactly how your money is spent. Include all of your normal monthly expenses like rent or mortgage, utilities, groceries and so forth.

Categorize all your expenses. Some categories will be inflexible, like house, insurance and car payments. Other categories, like groceries, entertainment and clothing, have the leeway you need to find ways to reduce your expenses. Examine these purchases to determine your spending weaknesses.

Do you eat out frequently? Cut back a few times a month and eat a home-cooked meal instead. Have a tendency to impulse buy? Write a list and stick to it; budget a few extra dollars for good, unadvertised sale items or things that you forgot to include in the list but still need. Eat before you go shopping for food to help curb the impulse to buy something just because you're hungry and it's delicious. Order pay-per-view movies a lot? Consider a service like Netflix. Wait for sales to go shopping for clothes or consider buying second-hand, especially for children.

By finding coping strategies that work for you, you can save a surprising amount of money with relatively little sacrifice. Only by understanding where and how your hard-earned income is being spent can you create effective strategies to reduce expenses and establish a savings pattern.