Is one of your resolutions this year to “spend less money?” I’ve made this resolution before, and I know many people have made similar resolutions. The resolution is kind of fun, for a while. You can trim every last expense and be left with some money at the end of the month. But before too long, the discipline required to make it work begins to take its toll. Your defenses are weak and you give in and spend more money than you wanted to. By the time the spring thaw arrives, your resolution is stone cold.
Here are some tips to make your resolution to “spend less money” stick. First, take baby steps. Take one small expense, and try to cut it down. Do you by a new DVD every week, buy new clothes too often, or eating out too much? Try cutting out just the DVDs. You don’t need so many anyway. With the time you save by not watching movies, take up a hobby. With the money you save by not watching movies, you can pay for that hobby, or just save it. After you’ve adjusted to life without the new DVD every week (and this might take a couple months), you can tackle one of the clothes, or the meals out. Just remember to do them one at a time.
The second tip is to use buckets to plan for your spending. If your car insurance comes due every six months, divide your total insurance bill by the number of paychecks between now and when the bill is due, and put that much money in your car insurance bucket every time you get paid. Then, when the insurance is due, just empty the bucket. If you use the bucket system with all of your major expenses, then you know you’ll be able to pay all your bills when you need to. Now you can breath a sigh of relief, because all of the money that’s not in a bucket is available to spend. Spend away! As long as you don’t spend more than you have available, you haven’t broken your resolution and you don’t need to feel guilty.
The key with resolutions is to be reasonable. Tackling your financial resolutions one small step at a time is the best way to ensure success. After a whole year of continuous small financial improvements, next year you can tackle another area of your life, like dieting. Ugh.
This column originally appeared in the December 31, 2008, edition of the Greenhorn Valley View.