Getting the Most Out of Your Paycheck
Paydays are the best days. That check looks so big at first; you begin to daydream about all the fun you can have with that money. Then reality sets in…before you get to enjoy it, your paycheck is eaten up by bills and obligations.
This doesn’t have to be the end of the story. There are several relatively simple fixes to make those bites smaller, so you can use more of that money to fuel your dreams.
1. Smart Spending
There are some things that simply can’t be cut out. Food, clothing, housing and transportation are all essentials. The Employee Benefit Research Institute conducted a study in 2014 and concluded that spending steadily increases until age 50, which is the average age for peak spending. The problem is that the majority of income raises occur between the ages of 20 and 30 and growth slows significantly by age 40. Be sure to tailor those spending habits based on your age and position in life.
Food is one area that can easily drain finances. Fortunately, there are several strategies that can save some money while still allowing you to eat well. One simple fix is to shop during weeks that you don’t get paid. This makes shoppers less prone to impulse buying. Making smarter choices around food buying, such as when and how often you go to the grocery store and using coupons to plan meals, can also help. The savings add up quick.
The mall and online shopping are some other places that can easily hack paychecks. Fight back with strategic shopping! A good rule of thumb is to make sure 70 percent of clothing purchases are worn regularly to cut down on unnecessary spending. Timing is also important, as there are certain times of year when prices are significantly lower.
2. Minimize Recurring Expenses
Transportation is the second largest annual consumer expenditure, according to the U.S Department of Labor. The average person spends 6.4 percent of their total income on vehicles and 5.1 percent on gas and motor oil. One big way to cut down on these expenses is to live as close to work as possible. Life Hacker determined that consumers can save $795 a year in commuting costs for each mile shaved off their commute.
Another big expense is insurance, with the average person spending 10.8 percent of their total income on insurance costs. The good news is that there are several discounts available to help lower this necessary expense. Mercury Insurance offers good driver and good student discounts, car safety rating discounts, multi-car discounts and more.
3. Avoid Unnecessary Impulse Buying
Have you ever stood in the checkout line and decided to pick up a candy bar, pack of gum or energy drink? While these purchases might seem minor at the time, they add up over time. Impulse purchases contribute to overspending and most of these purchases are not necessary or useful.
Research has shown that roughly 88 percent of these purchases are sale items and that shoppers making unplanned trips buy more on impulse. While impulse buying may improve your mood, what it won’t improve is your finances. Holding back on these purchases can help increase your savings.
Cutting expenses will free up money to invest in more worthwhile activities and pursuits. Every good budget needs some balance in it, and the possibilities to invest in are endless. With some wise planning up front, the sky’s the limit!