1. Realise you need to change your spending habits
We mostly tend to overspend when we don’t think about money management much. While that can be fine if we have enough resources to fund all our expensive habits, that’s rarely the case. It doesn’t mean we all have to become ascetic monks, living only on bread, water and sleep on wooden planks. In fact, keeping your spending under control and setting up a budget can provide you with greater comfort. Because Toshl helps you put all the little and unimportant stuff into numbers, you can lower that type of frivolous spending and have more money to use on the important and really pleasurable stuff.
2. Measure your spending
Knowing something should change in your spending is only the first part of the solution. You need to quantify all those expenses to really know where your resources are going. Note down all your expenses to Toshl and you’ll soon get a clear sense of proportion. If you’re like me, you might sweat the small stuff like spending on coffee, drinks and occasional lunches, but the actual costs of all that pale in comparison with the amount I spend on electronic gadgets without even thinking much about it. Measuring your spending is the only way to get a real picture about where your money goes.
I know noting every expense down takes some getting used to at first. But after a few days it’ll become an almost effortless habit. Buy your thingamajig, whip out Toshl, enter price, tap the tag(s) and you’re done! You’ll thank yourself later when you’ll have fancy financial visualizations custom made for you, telling you how and where you spend and can then actually save a lot of money.
3. Set up your budget
Alright, so now you know that you should put your spending in check and how and where you tend to spend (it rhymes, wohoo! :) ). Next step is to set up budgets. Budgets are basically your goals on how much you should limit your spending. There’s different kinds of budgeting options, depending on your goals, current habits and financial situation.
Budget types:
Keep it sane and balanced
The obvious first rule is that your expenses should not exceed your incomes. If you spend more than you earn and you don’t have some hidden treasure trove buried in the garden, you’re heading for trouble. Therefore, you can start by adding a budget in the size of your paycheck and other incomes.
In Toshl put in the amount you get paid for budget value, select the budget for all your expenses and make it a monthly or a weekly budget, depending on how often you get paid.
it means coffee in Slovenian – the language of the makers of Toshl.
It will keep you conscious of your financial limits and warn you when you get too close to that budgeting cliff edge. With that green bar showing you how much leeway you have, you should be soon able to move on to more ambitious goals of managing money.
Save it for the important stuff
Keeping your budget in balance is a good start, but you should be able to keep some money on the side for the more important, long term investments. Whether it’s a house, you’re saving for, university tuition or that huuuuuge fluffy bunny you’ve always wanted it’s good to keep some money on the side.
Put a budget for all expenses in, but make it lower than your incomes. Each month when you slowly fill up that budget, take care to not go over it. That way you can keep the remaining money and put them in that huuuuuuuge fluffy bunny fund. Or invest it in something safe. E.g. not fluffy bunnies.
Cut down on frivolous spending
You finally noted and measured your expenses and just realized you’re spending, for example, hundreds of dollars on cocktails per month. Well, if you’re spending hundreds on alcohol each month you’re most likely an alcoholic and you should take care of that problem first, but you can also set up a budget right after. :)
The thing I’m getting to is that you can set up, tag-specific budgets in Toshl. If you’re spending too much on one thing or a group of things, set up a budget with that tag or tags and check it often. You’ll soon be spending a lot less on cocktails and your liver will thank you for it.
4. Lower your spending
With all those budgets in place and graphs telling you what you spend on, you’ll lower your spending and save money in no time. It will make you one step closer to that huuuuge fluffy bunny, paying off your mortgage, or traveling the world.
