2013 is coming to a close and many of us are finding ourselves looking for ways to reduce spending in the New Year. Aside from some of the typical brown bag your lunches and skip the lattes advice (which is also great by the way), below are some big picture considerations and steps to take to keep more money in your pocket for 2014:

1. Set a dollar limit for impulse purchases. Set a limit of $100 (or whatever works for your situation) and follow the protocol that anything over that amount should require a 24-hour waiting period before buying (limited time sale or not). The 24-hour time period should be spent determining the answers to the following questions:

  • What you are planning on giving up to purchase this item? 
Dining out? Your next 6 Pilates sessions? Where will you make up the
difference?
  • How will you feel after purchasing the item? Excited for the new buy or guilty when you look at your bank or credit card
statement?
  • What does this item represent for you? Will you feel prettier?
 Wealthier? More tech savvy? What problem will this product solve and can it
be solved with tools you have on hand?

Impulse spending is what feels exciting, but can often cause the most harm to a financial plan. This is because they’re expenses that aren’t planned for and the resources are either borrowed using credit cards or pulled from another priority you’re working towards in order to make the buy. Either way, you end up behind somewhere.

2. Track or get a handle on your habit spending. This includes lattes, daily lunches, weekly happy hours, pricey yoga or pilates classes, etc. The problem isn’t necessarily the cost of these items, it’s the issue that the amounts aren’t tracked and there may be a lack of consciousness around how much is actually going out the door on a monthly basis. These amounts add up significantly over time. Setting up a spending plan will help you keep an eye on what’s going on with your money.

3. Understand your “wants” and “needs.” It’s easy to blur these lines and it’s tough not to feel like you “need” or “deserve” something after working hard all week or month long (Insert Donna Summer’s She Works Hard for the Money dance break here). Typically people get into trouble by spending money that they shouldn’t be to reward themselves with items that they really don’t need. Saving a pre-set amount each month and understanding fixed and discretionary expenses first should allow for adjustments to be made and a plan to be put in place if there is an item that one truly wants. The key is to plan and work for it and understand that it is likely a want and not a need.

4. Automate your savings. Make a commitment to contribute to your company’s 401(k) plan, build your emergency fund or max out your Roth IRA for the year and break it down into a monthly goal. Have these amounts automatically deducted from your paycheck and/or transferred from your checking account. Automating will allow you to treat your savings like a bill payment and anything left over will be yours to spend and work with.

5. Figure out what’s important to you. Many people end up spending their money on items rather than experiences. Step back and determine what your goals are with your money. Do you want to use it to accumulate more things or do you want to use it to take you on a trip out of the country? Determining the primary purpose that you want to back your spending will help you to remain conscious when faced with buying opportunities that go against it.

6. Set a monthly money date with yourself or your partner. If you’re not checking in on your finances least once a month, now is a great time to start. Set a schedule and get it on the calendar. It will allow you to address what’s important to you and check your progress on meeting your goals.

7. Earn more money. While we tend to focus on ways to spend less money, of equal importance is the ability to earn more. Take the last few weeks of the year to consider how you may be able to earn more in 2014. Talk to your boss about what it would take to earn a higher salary and prior to doing so research the average pay for your position using Payscale or Glassdoor for talking points. In addition, do you have the ability to start a “side hustle” and allocate time towards creating and selling items using a website such as Etsy or drafting and marketing an educational or training product? What about consulting to small business owners or entrepreneurs or doing freelance work on an hourly or project basis? Reflect on what you’re good at and would be considered your “specialty” and reach out to those that would be considered your target market for interest.

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