If you want to get out of the rat race and actually start making a difference in your financial situation, you need to focus less on chasing money and more on where you are spending it. You can’t have mental peace if you’re living lavishly, yet your bank account and credit are mostly at rock bottom. An essential part of personal finance is knowing how to spend your money practically and avoid financial death traps that won’t let you get out of that rut.
We’ve brought together the best financial tips on practical spending, from experts, that will help you gain financial stability.
1. Focus on Things you Value
“When it comes to spending money it’s important to focus on things that you value. This allows you to spend money wisely and have a plan for your finances. Creating a vision and purpose for every dollar that you earn will give a better understanding of how to manage money. Money management is all about learning from your mistakes and using them as an opportunity to make adjustments. Your money should be used for 3 things: saving/investing, enjoyment, and giving. These are the 3 practical areas to spend money that will lead to building wealth. By saving and investing consistently, you are creating good money habits so you have money later in life for retirement. It also allows you to build an emergency fund for those unexpected life events. Everyone works hard for their money and should have a set amount to enjoy. This keeps you motivated to keep reaching your financial goals. Giving to others is the key to building wealth. You get to help others and experience enjoyment from doing so. These are some of the tips that can be used when it comes to spending money in practical ways.”
Neiko Johnson, personal finance blogger of Secret to Finance
2. Long-Term Consequences Of Purchases
“Consider the long-term advantages and disadvantages of the purchases you’re creating. Many transactions are impulsive decisions to buy something you don’t need in order to please someone who doesn’t like you in the first place. So, while this is fine when purchasing a dollar chocolate bar at the supermarket, it becomes a bit of a challenge when you’re out shopping for cars and trying to impress your neighbors. Consider how anything will influence you in the future before you buy it. How long do you think it’ll last? Is it really going to put you in debt that you don’t need, and is the benefit you’ll get out of it over the course of its life worth the price?”
Eric McGee, Senior Network Engineer, TRGDatacenters
3. Only Put Money On A Credit Card That You Can Afford To Pay Off Every Month
“Credit cards are inherently a financial helper; after all, they’re just a convenient way to pay for stuff, and many of them give some kind of cashback, which is cool. You can only use your credit card to make purchases if you can pay it off by the end of the month. You won’t pay any interest if you pay off your credit card balance in full each month; it’ll be the same as paying cash. However, if you don’t pay off the balance each month, interest will spiral out of control. Dave Ramsey has told us all that one of the most important ways to do this is to simply put money in cash in envelopes for the budget things you would spend money on during the month. When that cash is gone, you’ve spent all of your money in that category. For example, you may have $400 in an envelope for restaurant spending, and once you spend $400 in restaurants in a month, you can avoid going to restaurants until the end of the month.”
Timothy Robinson, CEO of InVPN
4. Check Habits that are Draining Your Budget
“You will start searching for activities that are draining your budget after you start monitoring your finances. Expensive activities, excessive dining out, excessive clothing buying, and a variety of other financial drains you don’t need to incur are examples of these behaviors. If you’ve identified the behaviors that are consuming a significant portion of your earnings, you can decide if they’re truly important. And an envelope full of cash will help you keep track of where your money goes.”
Stewart McGrenary, Director at Freedom Mobiles
5. Learn To Value Savings Over Products
“Some people are born with the ability to save money and appreciate the process of their income. Others regard money as something that must be spent as soon as it is placed in their possession, and anything else seems like a waste of time. If you fall into the second category, you should strive to adopt a mindset that prioritizes savings over purchases. In the end, money invested and saved will almost always improve your life more than money spent on things that you will not be interested in in the future. You need to start thinking about what you can do with the money you’re saving, or you’ll never save anything. And it’s at this point that knowing how to spend becomes important. If you can increase your income by 15% to 20% a year, saving money becomes a lot more appealing.”
John Bertino, CEO The Agency Guy
6. Start Investing Early
“Spending your money wisely entails not only eliminating unnecessary expenses but also putting the money you save into activities that can help you achieve your financial objectives. There is no such thing as starting too soon or spending too little; even if you have nothing, you can begin selecting great companies and compiling a great watch list. Investing in quality businesses that will increase in value over time is always a wise use of your resources, regardless of how young or old you are or how little money you have.”
Amit Raj, Founder Amit Digital Marketing
7. Purchase Generic Brand Foods
“In the grocery store, you’d be hard pressed to discern any difference between name-brand and generic labeling. Are you not convinced? Compare the components in a bottle of name-brand peanut butter versus the generic grocery store equivalent. Rep with canned veggies, boxes of pasta, housekeeping items, and medication. When you buy a name-brand product, you are not purchasing the thing itself, but rather the concept that inspired the creation. In other words, premium products are more costly because their marketing costs are larger (not higher quality).”
Jennifer Harder, Founder & CEO of Jennifer Harder Mortgage Brokers
8. Proper Budgeting Can Help you Decide Practical Places to Spend
“In my experience, the most important factor for practical money spending is proper budgeting. The easiest strategy to follow is the 50-30-20 rule which helps you organize your finances and manage to save some money each month. It can be used for different amounts and I even used it for my business a few times. Basically, the idea is for you to identify all of the regular costs you have on a monthly basis. 50% of the money should be spent on fixed costs such as rent, insurance, loans, etc. This is easy to calculate and these costs don’t change frequently. 30% of the money goes into the ongoing costs such as food, new purchases or traveling. The rest of the money, 20% goes into your savings account and shouldn’t be used unless during true emergencies. Over time, this budgeting strategy will help you develop better financial skills and organize your money much better.”
Stefan Chekanov, CEO of Brosix
9. I Buy Less, But I’m Ready to Pay for the Quality
“I think most of our money goes on buying things that are cheap but poor in quality. We usually don’t feel the impact of cheap things right away, but if we need to replace it after six months or a year, we might be paying double what we would pay if we were buying quality things. That’s why I always do my research before I go shopping, ensuring the product I’m buying has good reviews. I check the spare parts and their costs or, if it’s something that has to be replaced, the price of replacement joints. When it comes to clothes, I also tend to buy more expensive things that could last for several years. I don’t buy clothes as often as I was before, and I avoid visiting fast fashion brands. I also tend to buy timeless items that could be styled in a few ways to avoid getting out of trend the next season.”
Andriana Moskovska, a Founder of DontDisappointMe
10. Add Value to Your Home
“A practical and beneficial way of spending money is adding value to your home through repairs and renovations. Whether repairing a leak or installing new wardrobes, upgrading your home in subtle ways will allow you to spend your money prudently and have a higher value and better-looking home. Clearing debt also counts among the most rewarding and practical uses of money that you have. Clearing your debts allows you to get yourself out of a financial rut firstly. Secondly, it helps to improve your credit score and, over time, gives you access to more extensive credit facilities. Thirdly, clearing your debts ensures that what you earn in the future can be spent on investments rather than paying other people or organizations.”
Harriet Chan, Co-founder & Marketing Director CocoFinder
11. Spend on Self-Improvement
“A good rule of thumb is to always spend less than what you make so that you have money at the end of the month either towards paying down your debt or building up your savings. Next, there are different categories of spending some which are essential and some which are desirable. At the bare minimum, you should be spending money to have food, housing, utilities, and transportation back and forth from your work. Once you have set the four walls to secure your life from any adversities you are ready to go on to the next step which I call desirable. In this category, the best money spent is the one you spend on your self meaning, enrolling yourself in a course to boost your career, or paying a trip to a conference to listen to a great motivational speaker, taking a gym membership.”
Cody Crawford, Co-Founder Low Offset
