S & P Accounting Services is an accounting firm situated in the Greater Toronto Area. A common question that our clients ask us is how could I budget wisely?
Overall, the top five tips that we recommend to our clients are:
1. Spend less than you earn.
This is easier said than done, yet if you follow through with this, you could be well on your way to paying off debts, saving for your retirement, getting your hands on that next generation Macbook or buying that beautiful home you dreamed of.
2. Create a monthly budget and adhere to it.
In order to know how much money is coming in and out each month, it is essential to devise a budget. There are different smartphone apps that make it easy to track your expenditure such as, Mint.com, YNAB, or Freshbooks. Conversely, you could simply create a monthly budget on excel spreadsheet for free.
Creating a monthly budget could definitely be an eye opener for you. It will allow you to see how much money you are spending on those sushi outings with friends or daily Starbucks fixes and may propel you to want to change your spending habits.
3. Pay with cash instead of credit cards.
A good way to reduce your spending is to pay your daily expenses with real cash instead of credit cards. Cash offers a real tangible experience. When you run out of cash in your wallet, you no longer have any more money to spend. “You see this and process it.” On the contrary, with credit cards, “it seems like it would be easier for someone to purchase more because a card, while tangible, does not represent actual money. It’s just a piece of plastic, and a shopper does not see the result of their expenditure for almost a month.”1
One well-documented study conducted by Dun & Bradstreet found that people spend 12-18% more when purchasing with credit cards instead of cash. McDonald’s reports that when customers purchase with credit cards, the average ticket is $7 as opposed to $4.50 with cash. Therefore, we advise that it is best to keep cash rather than credit cards in your wallet.2
4. Stick to your grocery list and brown bag your lunch.
Having a grocery list will save you money and time. Have you ever rushed to the grocery store two days in a row simply because you forgot that one important staple on your first trip to the grocery store? Or have you ever gone to the grocery store wandering aimlessly through the aisles, with little knowledge of what you have in your pantry and fridge and ended up buying multiples of the same product?
Having a grocery list will remind you what you need to buy and will ensure that you are purchasing food you know you will eat. Unfortunately, people throw away too much money on food because they purchase it and never eat it, or it gets moldy or rotten. Purchasing food that you intend to consume because it’s on your grocery list will help minimize wasted food.
A good way to create a grocery list is to first create your meal plan for the week. After completing your meal plan, write down the necessary ingredients on your grocery list. Make sure to take note of what you already have in your fridge and pantry in order to avoid buying duplicate items.
One meal planning app worth checking is Today’s Parent Mealtime. It could help you create a weekly meal plan from thousands of family-friendly recipes and then create a grocery list that you could email to family members so that you are all on board with what’s needed.
We also recommend that you brown bag your lunch. This will save you hundreds or even thousands of dollars per year and as an added bonus it is usually healthier to eat a homemade meal.
5. Don’t buy on impulse.
Consumer psychologist, Ian Zimmerman, Ph.D., points out that “impulse buying is related to anxiety and unhappiness…The impulse buyer may feel unhappy and may think that being seen with an expensive new purchase will bring respect and happiness. This perceived road to happiness motivates the impulse buyer to go shopping…likes [a] product, and experiences pleasure at the thought of being able to purchase it immediately and go home with it.”3
Therefore, when you are down in the ruts, don’t use shopping as a therapy to give you a quick pick me upper. Instead try to find different avenues to deal with frustrations, boredom, and fatigue such as meditation, exercising, writing, drawing which are all practically free. One technique that could help you avoid impulse shopping is doing deep breathing exercises. You are window shopping with no intention of buying anything and you see those new Nike shoes and want them like now…”Take a breath and try this instead: Tell yourself you can buy it, but not until next month. By then, you’ll either have enough saved up or you’ll decide you don’t like it that much after all. Even better, if you wait it may be on sale! Problem solved.”4
In the same vein, when you go grocery shopping, stick to the items on your grocery list and never shop hungry.
In conclusion, in order to budget wisely and help achieve your financial goals, it is well worth it to follow these five tips: 1. spend less than you earn, 2. create a monthly budget and adhere to it, 3. pay with cash instead of credit cards, 4. stick to your grocery list and brown bag your lunch, and 5. don’t buy on impulse.
About S & P Accounting Services
S & P Accounting Services is a professional accounting firm situated in North York, Ontario. We are chartered accountants with extensive experience with audit, review, tax and bookkeeping. We strive to operate in accordance with our principles of quality, professionalism, and integrity and are dedicated to excellent service. We aim to ensure that our clients receive the highest quality of financial, tax and accounting services and advice. We happily serve clients in Toronto, North York, Mississauga, Vaughan, Richmond Hill and in other cities in the GTA.
If you have any questions or inquiries about our accounting services, please contact S & P Accounting Services.
S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
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