Live On Cash For Two
Weeks.
When is the last time you only used cash to pay for your
purchases? Debit and credit cards help many people develop bad spending habits
and result in their inability to differentiate between what they can actually
afford to pay for and what are the avoidable unimportant expenses. With cash,
it is very easy to tell if you can afford to pay for something or not.
Your first assignment is to put all of your cards away for at
least two weeks. When you need to buy something, you are only allowed to use
cash. After two weeks, if you have managed to do it, give yourself a passing
grade.
Increase Your Spending
Awareness.
Consider what you have learned about your spending habits by
only using cash. Was it easier or harder to part with cash than card? Did you
only buy things you needed, or was there also enough money to buy something
that you wanted? How much did you have left at the end?
Some studies have found that people spend as much as fifteen
percent more per purchase when they use card instead of cash. Spending more on
every purchase adds up over the years, and if you want debt solutions that last
for life, be aware of how you spend your money.
Find Out Where Your
Money Goes - Track Your Spending For Two Weeks.
Where does it all go? Every pay day there is money in your bank
account, but it never seems to last long enough.
Your second assignment is to track your spending for at least
two weeks. In a little notebook, or by using an application or
software, make a note of where you are spending your money. You might want
to track how much you spend on certain types of expenses, e.g. coffee or drinks
out, or maybe track what you spend in certain stores may be easier. Either way,
to pass this assignment, you need to have at least two weeks’ worth of spending
information jotted down.
Create A Spending Plan
To Solve And Prevent Financial Problems.
Creating a monthly plan for your spending is one of the smartest
things you can do for your finances, yet it is the most overlooked solution to
most people’s financial problems. Having a spending plan makes life so much
easier because you have given yourself a guide to decide how you want to spend
your money.
Ironically, it is also one of the things that you will likely
never learn in a class at the university. Most schools do not teach students
how to create a spending plan. So, to help with this lack of training, your
third assignment is to outline your spending plan.
A spending plan based on real numbers sets you up for success,
so use what you learned when you track your spending.
If there is an expense you want to cut out of your spending
plan, start by reducing it by half. This will tell you if you can stick it out
for the long term. If you can make having a spending plan a part of your life,
you will know that you have passed this assignment successfully!
Find A Replacement For
One Large Expense In Your Monthly Expenditure.
Cutting out an expense or changing a habit is easier if you
replace it with something else. For instance, if you want to quit buying
expensive coffee on your way to work, plan how you can replace this habit with
a new one. You might buy yourself a new travel cup and purchase some coffee in
sachet that you enjoy drinking and can be made at home!. Then change your
routine so that you are not tempted to stop for coffee by taking a different
route to work.
Your fourth assignment is to find one expense that is taking a
real bite out of your spending and find replacement solutions. Cutting back on
coffee is just one example. What about your entertainment costs, quitting
smoking or scaling back on what you spend on hobbies and recreational
activities? You will know that you have passed this assignment when all of your
bills are paid up to date and you have got a little extra left in your bank
account.
Identify Expenses You
Can Reduce.
Over the next month, identify areas of your spending plan that
need some special attention. Look for ways to decrease your spending on
your utilities. Do your laundry with cold water instead of hot; turn the
heat down and the lights off when you are not home. If you have a home phone as
well as a cell phone, decide if you need both. Routines can be hard habits to
break.
Also identify products or services you no longer need but which
you are still paying for. Many people simply let their bundled services renew
from month to month, even when their needs have changed. This might be because
they are too busy to look at their bills carefully, but taking the time to go
through your bills line by line and calling the companies to make changes to
service plans, or cancel services altogether, can find a lot of hidden cash.
If you have not guessed it yet, your fifth assignment is to
identify what expenses you can reduce and then create the plan to follow
through with your changes. You will know you have passed this assignment
when your bills get a little smaller.
Create A Plan To Pay Off
Your Debt.
Everybody has some debt, so is it really that big a deal? Yes,
it can be. If you have debt that has slowly accumulated over a number of years,
you need realistic debt solutions that work for your lifestyle, not quick fixes
that you cannot live with for the long term. At some point interest rates will
start going up and eventually your income will likely decrease when you retire.
When either of these things happens, if you have relied on credit to make ends
meet, you will find yourself facing some very tough choices.
Dealing with debt sooner than later leaves you with more
options. You will only be able to pass this assignment if your plan is
realistic and you draw on what you learned in the other five assignments.
Get Help With Your Debts
And Your Expenditure.
If you need help dealing with your debts and finances, do not be
afraid to ask.
You will know you have passed this assignment when you come away
with additional insight about what you can do to deal with your debts more
effectively and implement your spending plan realistically. Any good solution
takes time to follow through with – your debt did not happen overnight; it will
likely take some time to pay it off.
Start Investing Early
Spending your money wisely is not
just about avoiding unnecessary purchases – it also requires you to take the
money that you save and put it towards things that will help you reach your
financial goals. With that in mind, there is no such thing as starting
investing too early or investing too little.
No matter how young or old, that
you are or how little money you have to invest, putting your money into quality
companies that will grow in value as time goes on is always a wise use of your
income.
Educate Yourself.
Last but not least, one of the best things any university could
instill in its students is the desire to learn more. Any degree of learning
from our mistakes is worthwhile, especially when we are educating ourselves
about how to manage our money and our debt better.
Your final assignment is to keep learning. Take on more
challenges or homework from the school of common sense. Life skills that
further develop your new money habits will keep you on track with your spending
plan, help you avoid financial problems, and help you plan for your future
successfully. And that is a graduation worth celebrating!
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