Americans' perception of frugal living has changed substantially since the Great Depression according to the recent report by Pew Research Center (2010). Now, consumers are searching for ways to adjust their spending habits which is clear in the growth of financial tools available to help them save money. With the right knowledge and tools, you can take control of your finances and rebuild confidence in the way you live your life.
Frugal living is the first step in managing your finances. You have to know where your money is going and how you want your money to work for you. According to the Federal Trade Commission (2011), self-help is the most effective help in managing debt and personal finances.
1. Review financial documents including bank statements, pay stubs and credit report.
Your bank statements can explain more than you're willing to admit. Your bank and credit accounts sometimes receive overdraft fees and interest fees because of your misuse. Identifying the real issues behind your spending habits is the only way to make a change.
For example, if you earn $5,400 a month and pay $7,000 in bills so you are in the red and owe $1,600 to creditors, which can go to collections, that damages your credit ratings. If you notice overspending in your accounts, you can start tracking your spending to see where your money is going.
2. Track spending for 30 days.
You can see where your money goes if you keep track of every dollar spent for 30 days. By tracking your spending in a systematic method, you will develop the skills necessary to find problem areas. Getting your finances on track means monitoring the amount leaving the home, so you save more to invest within the home.
3. Create a two-column spreadsheet for your experiment.
Grab a sheet of paper to create a two-column spreadsheet outlining every cost you have during the month. In the first column, write the estimated amount you think you pay each month, and in the second column, write the actual amount then file the invoice under expenses. Identify and cut unnecessary spending then develop a budget to repay debts and build an emergency fund.
4. Work with credit card companies to lower interest rates.
Lower interest rates can increase the cash flow you have remaining after paying your monthly expenses. Review your Terms and Agreements, Truth in Lending Act forms and contact your creditors directly to ask about lowering your interest rates. If you can take control of the payments, you will save money.
5. Consider a different credit card.
Do you have cash back credit cards in your wallet? Unfortunately, many people are unaware of the benefits geared towards saving money with credit cards. The best credit card deals help money managers in saving money with low interest rates and 0% introductory offers. If you have too many credit cards now, consider making a balance transfer to a lower interest rate card offered by the same creditor.
According to the Pew Research Center, 62% of households have changed the way they spend their money to survive (2010). Another half reduced the amount of money owed on credit cards and improved their savings habits.
Daniela Baker is a personal finance blogger at CreditDonkey, where she helps consumers find the best credit card deals to get their finances back on track. You can make a few changes to your lifestyle by changing the way you see money. Money is a tool; money is an object that makes living easier. Take control of your finances and you will take control of the way you spend your remaining dollars in reaching your goals.
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