3. Create a spending plan
A spending plan, also known as a budget, is a list of your monthly income and expenses. It can help you see how much money is being devoted to both necessary and discretionary spending, and you can make changes as you see fit. A budget can be made using an app, a spreadsheet or cash envelopes, says Charlie Bolognian, CHF, CFP, and founder of Side-by-Side Financial Planning.
Both regular and one-off expenses should be accounted for in your budget, Bolognian says. “Proactively identifying even just a few top one-off expenses through the year — such as property taxes, car registration, tuition, back to school shopping, etc. — and incorporating those can make a big difference in your plan accuracy and confidence.”
4. Spend less, save more
Saving often starts with spending less. Whether it’s a pricey hair salon, daily premium coffee or brand-new clothing at retail prices, most people can find things to trim from their budgets.
When you cut back on spending, don’t leave the savings in your pocket, wallet or checking account, where you’ll likely just spend the money on something else. Instead, make a payment that day on a debt or transfer the money to a savings account where it will be out of reach.
“Try to reduce one spending habit that is discretionary and bank the savings or put it toward paying down a debt,” Women+Wealth Solutions’ Rogoszinski says.
Paying off debt can free up money that you can redirect to savings or investing. Make a list of your debts and pay off those with the highest interest rates or smallest balances first.