These days, it seems everyone is living in a giant home, driving a new car, and going on lavish vacations. It can be difficult to "keep up with the Jones's" if you are in an average job living on an average wage. It is easy to think that you are doing something wrong, not making enough money, not budgeting your money wisely, not getting the deals everyone else does. Add to this the vast amount of media that tells us to buy more, spend more and consumer more. It becomes very difficult for the average person to save any money at all.

However, what we don't hear about very often is the huge amounts of debt that most people have looming over them. In the U.S., average credit card debt alone stands at a whopping $15,000 per household, and these amounts are not decreasing. North of the border, the average consumer debt for Canadian stands at $28,000. So it seems that Jones's may have plenty of stuff, but they also are paying handsomely for it. 

Certainly, we have become a society of "buy now, pay later". While this is helpful in getting items we may need (for example, a car or a home), it is not helpful when we use it for discretionary spending (e.g. for a Disney vacation). It is this very attitude that keeps banks and credit card companies happy and earning billions, while we scrape our pennies to make our next payment. We need to break this habit if we want to begin to save money and build wealth. 

Most people wish they were wealthy. Most people dream of being able to retire young, with their homes paid off and spending their summers in sunny Florida. While this is possible for some, it is becoming increasingly difficult for many of us. 

Building wealth is possible for anyone, though. It starts with controlling our spending habits. 

Step 1 - Knowledge is Power

Before you can control your spending, it is helpful to know what you are spending your money on. I know I spent $235 last month on fast food alone. Wasted cash sitting in my belly. How do I know this? These days, most banks have a finance tracker that automatically categorizes your spending for you. This works great if you only have one account that you use for the majority of your spending. They often have graphs, charts and a detailed breakdown of each item, and you can change the categorization if it is wrong. You can look back at a year's worth of spending or a month's, whichever you need. 



Bank Expense Generator
Credit: Royal Bank

These software tools are amazing because they really help you to understand where your money goes. How else would I know that I spent nearly $180 at Dollarama last month? Time to tighten up!

What if your bank doesn't have these kind of tools? There are many software companies online that can assist you in developing a budget or that will track you expenses for you with minimal effort on your part. One great example is a site called Mint, which allows you to download all of your bank data onto their site, and then they will organize it for you. Not comfortable having a third party looking at your data? Try using Quicken or another program that stores the data in your computer. There are hundreds of such programs, so many that I cannot begin to list them here. A quick search will help you find one that is right for you. Chances are, however, your bank already has this for you.

Now that you know where your money has gone, you can figure out how to curb some spending. I know, this is where it gets painful....

Step 2 - Budgeting: Pain on Paper

For most people, making a budget is not difficult. It is the long days of following it which make it so hard. Often, this is because many people begin budgeting before they have a good understanding of how they spend their money. They haven't gone through Step 1 yet, but instead just try to guess at it. Kind of like when I took calculus, and about as successful. 

This is why it helps to look at your spending habits first. Once you have an idea of where your hard earned cash is going, now you can create a budget, either using the tool in your bank or software program, or on paper. If you are using a software budgeting program, it will probably create most of the categories for you. If you are doing it on paper from scratch, look through your spending and create some categories that you regularly spend money in, for example, Mortgage, Car Payment, Gas, Groceries, Entertainment, etc. 

Once you have the categories determined, you need to find out how much you are spending on average each month. This is where the software programs can really assist you, and make the process of budgeting so much easier than it was for our parents! 

To truly get a grasp on our spending, it doesn't make sense to look at one month independently. For example, if you tried to build your budget using only the spending information from December, you would probably be shocked at how much you spend on gifts and food. This is a fairly unusual month for most people though. We spend way more on both those categories than we normally would. 

So instead of using only one month, use the last twelve months, and average it out for one month. For example, if I look at my twelve month spending on food, it might be a total of $8,216. I then divide this by 12 month to find out my average monthly spending, which turns out to be $684.66 per month. For my budget, I might decide that my eating habits are fine, I don't really feel like I waste a lot, so that average is a fair amount. I would probably round it out to $685 or even $700 per month on my budget, and then try to stick to that amount. 

Go through the same process for all of you categories, and decide if there are areas that you feel you are unhappy with. For myself, I can't believe the amount I spend on fast food (yes, it is an addiction) and gifts. I am constantly trying to find ways to lower the amounts I spend in these areas. I have other areas where I feel that I spend a reasonable amount, so I leave them alone. 

Step 3 - Follow the Course!

Here is the part most people have trouble with. It is easy to create a budget. Following it so you can save money is another matter. It takes discipline and can be so difficult, especially if you have made your budget tight. Here is an easy way to assist you in keeping you budgeting efforts on track, though. I promise it isn't any more painful than a trip to the dentist. 

First, gather a bunch of Mason jars - enough to have one for each category of your spending that you don't pay online (ex. groceries, gasoline, movie nights, etc). Use cash for these expenses. It keeps you from going over your budget because you can actually see the amounts getting smaller and smaller. Put enough cash for each category in each jar for the month. When you go shopping, take only what you might need, and then put the change back into the jar when you get home. This makes it really easy to keep on track. The hardest pat of the process is going to get the cash! If you find that putting the entire month's budget into the jar makes you feel uncomfortable, just put in one week at a time. 

What if you spend too much in one category? No problem, borrow from another. I have used this technique often and I find that I usually have some money left over in one category or another at the end of each month. If you have created a budget, you are controlling your spending, so feel free to spend it. 


Hopefully, you will find that after a few months of using this process it isn't too bad for you and you should start to see some more dollars adding up in your savings account. More importantly, you should now be able to live within your means, develop a budget and not feel like you are scrimping and saving. You really are living on less and still living.  


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