Good to Great: How to Scale With an Outsourced CFO

Do you ever feel that your spending is out of control? Would you like to save more money for the future? Do you often regret your purchase?

If you answered “yes” to any of these questions, it’s time to think about how to optimise your spending habits. We’ve put together the following strategies to help you reign in your spending and feel more confident about your money management. After all, when you have control over your finances, you can face the future with confidence.

 

1 - Create a Budget

If you genuinely want to take control of your spending and use your resources to get what you want, you need a budget. Unfortunately, the word “budget” seems to inspire resentment and passive-aggressive tendencies. Perhaps this is because we focus too much on the perceived constraints imposed by budgets.

The truth is, however, that a budget can free you from worry and help you to achieve your financial goals. When you actively use a budget, you can make informed decisions about your spending. Let’s say you’ve budgeted $75 for clothing for the month, but you come across a fantastic deal on a jacket that costs more than $75. Instead of going into debt for the coat, you can make a sacrifice in one of your other budget categories. For instance, you could decrease your budgeted amount for dining out so you can afford the jacket.

With this kind of financial awareness, you can manage your money on the fly, making sacrifices when necessary. You might discover that your purchases mean more when you plan carefully for them.

 

2 - Declutter Your Home

What do you have tucked away in cupboards, closets and cabinets? If you’re not sure, you could be spending unnecessarily on replacements of items you already have in your home.

This coming year, set a goal to declutter your home to optimise your spending habits. Not only will you rediscover items you might have unknowingly replaced, but you also may decide that you already have too much stuff. The Choosi Clutter Report reveals that Australians have nearly $60 billion worth of unused items cluttering our homes. When you take control of your clutter, you change your outlook on spending and think twice before bringing home more stuff.

 

3 - Plan for Infrequent Purchases

Most of our expenses occur regularly. Rent and mortgage payments are generally due once per month. The same can be said for energy bills, car loans and many other predictable expenses.

But what about infrequent purchases? A costly car repair can throw off your cash flow for several months if you don’t have an emergency savings fund. Instead of allowing infrequent purchases to surprise you and sabotage your budget, plan for them.

Some people plan for these expenses by setting aside a certain amount for them each month. Your Christmas fund, for example, might receive a deposit of $100 each month. By the time Christmas rolls around, you’ll have a generous budget from which to splurge, and January won’t feel so dismal.

 

4 - Consider New vs Used

Another way to optimise your spending habits is to buy used items instead of new. You can buy some products for a fraction of the price you’d pay when they’re new. When you can save significantly in some areas, you have more to spend on other priorities.

Consider buying the following items used:

• Exercise equipment (many people buy them with good intentions but never develop a regular habit of using them)
• Hand tools (they last forever, and many people offload them when they change jobs)
• Tech gadgets (last year’s model can offer great value while still operating smoothly)
• Sports gear (start with used equipment while you decide if you’ll get into the sport)
• Cars (they lose considerable value as soon as they leave the dealership’s lot)
• Furniture (shop for used furniture during times of the year when most people move or downsize)
• Bicycles
• Clothing

 

5 - Automate Where Possible

Reduce impulse spending by automating your purchases when possible. If you can order your groceries from home, you can glance through your refrigerator and pantry and buy just what you need. At the store, however, you may buy more than necessary.

You may also be able to optimise your spending habits by signing up for subscription services for other items you regularly use, such as soap, household supplies pet food.

 

6 - Set Long-Term Goals

When you have long-term goals in mind, it’s easier to keep your spending under control. Instead of taking an extravagant vacation, you can picture your early retirement and feel satisfied with a closer-to-home holiday.

If you’re unclear about your long-term goals, sit down with your financial advisor and talk about the future. What kind of lifestyle do you want to have when you retire? When would you like to pay off your mortgage? Do you want to leave an inheritance for your children? With a clear concept of your future, you will see today’s spending in a new light.

 

7 - Temporarily Cut Back Drastically

Some people want to make changes to their spending, but they’re not sure what to change. Here’s an experiment you can try that will help you to make those decisions.

For a couple of months, cut back drastically on your spending. Cut every budget category you can without jeopardising your credit score. In other words, pay your bills in full (such as your mortgage and utilities), but cut back on categories like food, entertainment, clothing and recreation.

At the end of the experiment, evaluate the experience. You may find that it was no big deal to slash your entertainment budget in half. In fact, you might have discovered new pastimes thanks to your self-imposed constraints. On the other hand, you may have found that your current food budget should not be reduced. Without trying, however, you may never know.

 

8 - Evaluate Your Spending Annually

Life changes from year to year. Children grow, and hobbies change. What you spent last year might be significantly more or less than this year.

At the end of each year, take a look at your current spending habits. This yearly evaluation will keep you on track with your goals and help you to notice destructive trends before they derail your long-term plans.

When you sit down with your financial adviser, discuss areas in which you might be able to optimise your spending habits. Check on your cash flow, and see if you have extra income that could be put to better use through investments.

To set up a consultation with one of our wealth advisors, get in touch with us at Altus. We look forward to helping you reach your goals.