Firstly - Do you spend then save, OR save then spend? It's an interesting question to ask yourself, isn’t it?
Either way, learn how to spend and save money the right way by reflecting on these two strategies below.
The Two Strategies:
1. Spend then Save…
Essentially, this is what you most likely do. It is what we are taught to do in a budget. Add up everything you spend your money on and then see what is left over to save. Lots of people are doing it this way and like yourself, probably struggle to create any significant savings.
In fact, few might argue that they cannot afford to save as they have spent it all on bills, utilities, the car, and the family! Are you one of them?
But, like you, we all want that fabulous lifestyle, right? That gorgeous car, nice house, and overseas holiday... but it comes at a cost.
If you spend then save, then there is generally no savings available for an emergency or for a rainy day. Do you really need all those things that you are spending your hard-earned cash on in the first place? Perhaps not.
AND, because of this spend then save approach, your savings account goes up and down, and never actually reaches your goal... Such as saving up for a house deposit to get out of renting, saving up for a car that is reliable, saving up for that holiday you always wanted and absolutely need, or even an emergency fund for when life doesn't go the way it should...
It's causing you to be stressed, as it feels like you will never get there.
If you cut back on a few things by a little, it can make a huge difference. So… Are you Spender then a Saver?
2. Save Then Spend…
So if you are not a spend then save person, you are a save then spend person...
You essentially have a financial goal in mind for something in particular you know will take time to save up for. You have then decided how much you are going to put aside each week (and perhaps some additional in an emergency fund). To which you then know exactly when you will achieve your goal in the future.
So this is the different part to the first strategy above. Once you have that decided on the amount to put aside each week, you then adjust the rest of our outgoings/spending accordingly and always put the amount aside FIRST.
This type of person might seem to be a bit frugal (or “tight” with their money). However, they are generally financially confident that they have it all covered.
That’s because they are planning ahead, thinking of all the potential possibilities and eventualities. What’s more, they are driven to making things work because they have a plan. It may not always work, but the plan (and the focus) is there.
They know what they want to achieve and are prepared to work for it, even if it includes cutting costs along the way.
AND, you know what... They sleep a whole lot better than the first crowd above, as the Spenders will be stressing about not having any savings or an emergency fund…
Or even worse, the Spenders “don’t care". But, when life is not its best, they surely do care... which just adds even more stress to the whole situation.
So which one are you? A Spend then Save person with financial stress, living week-to-week with no savings?
OR
A Save then Spend person with good sleep, no money worries, no stress, and knows when they will reach their financial goal?
If you answered yes to the first one, then you need a Spending Plan as it demonstrates exactly where all of your financial commitments are currently going… and more importantly, where they need to be in the future. It even factors in (and plans for) all eventualities… It will even HELP you move your mindset from the first strategy to the second. How good would it be to get a good night's sleep and feel no stress over money?
If you are the second person, then a Spending Plan can help you achieve your goal faster, because, in addition to the above, it can track your spending which will allow you to find new areas to cut back on or even unnecessary expenses. AND with that extra savings, it can add to your savings account to reach your goal faster.
Let's Get Started On Achieving Your Goals
For more information on creating your very own personalised Spending Plan, request a callback or schedule a time with an expert below.
