We all say it.  Some variation of "I need to make more money".  It often starts out as "if only I made more money, I could..." and then you insert your desired situation "save for retirement, get a bigger house, afford a vacation".  It's natural to focus on income when you're feeling strapped for cash but how about the other side of the equation - what you're spending.

The majority of the time people cannot control their income greatly. Yes, you may be able to work more hours or take on a second job or ask for a raise.  But realistically, you probably cannot greatly change the level you of income you're receiving without changing careers, which would likely mean going back to school or relocating, neither of which is quick or painless.  However, you can control what you spend. 

First let's assume you are making a reasonable amount of money and yet it always seems like you're running out of it. You certainly would not be alone: 51% of Canadian workers are living pay cheque to pay cheque*.

Let's talk about some ways you can make the money you earn go further to cover the things you want to do:

1.       Track your spending for a couple months.  If you currently don't know where your money is going then it will be very difficult to make changes to spend more wisely.  

2.       Once you see your spending patterns, look at the biggest areas you can control. Usually this is food, entertainment and clothing.  Set reasonable targets for each area of spending.

3.       Make a budget and review it at least once a month to see if you're on track.  It's as easy as adding up your receipts.  

4.       Make small changes that will add up.  No one is going to give up all their indulgences at once, nor should you. But you can look at your spending and see if you can tweak it slightly to save you money each month. Here are some examples:

·         Reduce the amount and size of gourmet coffee you're drinking daily.

·         Switch to a lower priced grocery store. It would be worth it to drive a bit further to buy your groceries at a less expensive place.

·         Put more time into your food for savings on your groceries.  Making things from scratch takes more prep time but is less expensive than pre-packaged dinners.  Also, you can often get several meals out of it and make up the time you lost in preparation.

·         If you're paying banking fees, look to switch to an account that has no fees or allows an unlimited amount for a flat monthly rate, if you're a high user of debit.  And make sure you only use bank machines on your bank's network - paying $2-4 to access your money is not worth the convenience.

·         Consider your viewing habits: look at scaling back your cable package or watching movies at home rather than in theatre.

·         Eat at home one more night a week.  

·         If you're saving money for something, put it into a separate high interest savings account.  Have the pre-authorized debit take place on your pay day so you never have a chance to spend that money.**

·         If you need to buy something for your home or even clothing, consider second hand.  You'd be amazed at the quality of things people post for sale at a fraction of the price brand new.

·         Ensure you're using the points programs of the places you shop.  If you have to spend the money anyhow, it's great if you can get cash back or other perks as you accumulate points. 

·         Clean house.  Go through your closets, cupboards and drawers.  Anything you don't need or want anymore put into two piles: donate or sell.  

·         Turn the lights off and the heat/ac down.  Electricity and utility bills are unavoidable but reducing your power consumption can make a noticeable difference in your monthly bills.

·         Look at your credit card interest rates.  If you're carrying a balance, see if you can get a card with a lower rate and transfer it there. 

5.       Speak with a professional.  It can really help to have an unbiased, third party look at all the numbers and come back to you with a recommendation. An insurance broker can also look at your different policies and find redundancies in coverage - for example, creditor insurance on your card may already be covered by your personal or work insurance. A financial advisor can also let you know if you should see a mortgage broker about re-financing and consolidating your debt - that could save you hundreds, even thousands, of dollars a month.

Once you've made your budget, tweaked your spending and ensured you don't have redundancies, add up the savings and then take that and put it aside every month. Your financial advisor will provide with you good advice on where is best to allocate that money going forward. 

Good spending habits are just as important if you're making $30,000 a year or $130,000 a year because if you don't learn how to manage your spending, more money will just lead to more spending and not more money saved at the end of the day.  If you can get your financial picture organized now and start spending smarter, when you do get that raise, you'll be sitting pretty!  After all, when it comes to your finances, you are what you spend.


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