How do you motivate yourself to reduce your spending

[NewLifeOrNot]

Currently considering several big life changes. Think relocating, different jobs, possibly being a SAHM for a while etc. All of the various scenarios we are considering (including just staying where we are and not changing jobs etc) involve being more careful with money. However we are not really in any debt other than student loans and mortgage. We do currently have a balance on a 0% credit card but we have more than that amount in savings so could pay it off if needed. The reason I don’t want to yet is that we are still building up an emergency fund and I like to have a decent amount of cash on hand in case of emergencies (can’t put all emergencies on a credit card). Plus we are currently earning 4.5% interest on the cash and have a plan to pay off the credit card to ensure that we don’t pay any interest.

So my question is really how do you force yourself to stay on track when there’s no immediate incentive? All our financial goals are 3-5+ years away. I’m finding it too easy to be tempted by small frivolous spends, nothing huge just the odd meal out or new lipstick or whatever. We do have a certain amount budgeted each month for these type of spends but finding myself creep over each month and then not saving quite as much as I should be really. Grateful for any tips!

We use a credit card in the same way but we track that spending really carefully. We write down everything we spend and don't go over our self imposed limits.

Well that depends on the person. To me, a credit card is just a payment tool that is completely separate to the decision to buy something. I know I'm spending money however I pay for what I'm buying.

Using a credit card simplifies my finances, because all day to day purchases come out of my current account, in a single DD rather than dribbling out in many transactions each month.

It means that I earn cashback and more interest on the money in my current account, it's safer when buying online as if if was hacked it would be less inconvenient than a hacked debit card with knock on DD issues if money was taken. Plus purchase protection if something is faulty or if a supplier goes bust.

1. Don't use a credit card for any frivolous/ small spends on yourself. Ever.

2. Put an amount of money into an account each month that is for spending on things like your lipsticks/ meals out etc. Have a debit card for this account.

@Bjorkdidit But that's clearly not the way OP is doing things as she's struggling to budget. For OP, it would be better not to use a credit card whilst trying to get a grip on her finances.

@Bjorkdidit So clearly paying by credit card doesn't make you overspend but the OP admits she fritters and evidence suggests she is not alone. I use the credit card for large spends for the S75 protection and also sometimes to buy me time to move money from savings. Flashing a credit card doesn't require thinking power unless you are close to your limit and dealing with the bill is left for a few weeks. Using a debit card normally means people think for a moment whether there is money in the account and they really want or need the item.

Cashback and protection are all good reasons for using credit and if people are not struggling to save or cutback if on a tight budget or are financially disciplined enough not to overspend regardless of payment method then it will work. The op is not saving as much as she wants though and may have to cut back if their income drops so going back to basics and living without credit sometimes helps that.

Credit cards are like fire—used appropriately, farmers can maintain their fields, or fire can keep us warm/cook our food. But used wrongly, fire can burn the whole place down.

I would agree that CC can simply be a payment tool if you don't have issues with overspending.
I've done this for years , got interest on my cash and vouchers.
All discretionary small expenses/ spends are on a prepayment so I get cashback as well.
If you do have a problem then it's not a great idea to use a CC as others have said.
Op needs to get to the bottom of why she fritters on small stuff first.
It's either a quick emotional boost or fix but then it's repeated again and again or she's mistakenly looking at small spends in isolation not as the total amount .
Sometimes in relationships it can be a mirror of what the partner is doing .
He's spending x amount on beers/ coffees but not much else though
Personally DP and I agree on " spends" and transfer them to our prepayment cards.
I cba about coffees out etc so I currently have 4 months spends on my card.

I’m also someone who puts all the monthly spend on the credit card but I pay it off in full every month. I only keep enough in my current account to pay my bills for the next week or two, everything else is stashed in a chip 5% instant access savings account or flexible isa.

Things I find helpful:

• Checking my CC balance every morning.
• Checking my Chip balance every morning as the interest is calculated daily, so I’m keen to keep as much as possible in there.
• Spreadsheets of my spending - I’m a freelancer so I need to keep a close eye on outgoings as my income can fluctuate.
• Having “no spend” periods - I’m only allowed to spend for one week after my credit card statement date and then for a few days after my credit card payment date - around 10 days total per month.
• Like a PP mentioned, anything I want to buy, I put a link in my notes for my next “spending period”, sometimes I don’t still want it by then.
• I don’t view shopping as a leisure activity.

Using this method, I’ve managed to scrape together enough of a cash safety net to cover my basic expenses for probably a year but I’m massively paranoid about money after growing up dirt poor, so I rarely let my foot off the gas.

I’m now off to check out YNAB!

Thanks everyone for the great ideas!

I think you need to wean yourself off the credit card, because at the moment, you start every month in debt.

It'll take a few months to "catch up" on yourselves but if you're strict you should be able to do it in 3-6 months.

Or, if you like using a credit card because of the benefits (I use a credit card because I use the Avios for all my travels, I basically never pay for flights!), then what I find works well for me is to put all the money I spend on my credit card aside the same day I spend it.

As an example, if I buy something costing £100 on my credit card, I immediately shuffle £100 of that month's money into an instant access savings account or similar. I use a Monzo pot for this. When I get my credit card bill, I then have the money set aside to pay it off. It means I never have to use next month's salary to pay last month's costs.

This gives me a much better sense in-month of what I'm spending.

Then, you can adopt the approach of "pay yourself first". There are loads of decent high interest cash savings accounts at the moment. Do a budget every month, calculate the money you're going to save at the start of the month, and IMMEDIATELY put it into your savings. It's gone. Out of sight, out of reach. Now you only have your actual month's money to spend.

I do exactly this and it really works for us. I keep a running total on my phone EVERY time we spend something on the credit card. I feel totally in control of where our money goes.

You need to categorise your money better to give yourself more restrictions. Just chucking everything on a credit card each month isn't really restricting your spending? We are on a tight budget through choice - hammering pension at the moment and saving for school fees. So it can be hard when, in theory, we have a decent amount to spend but are saving for things that are in the future.
Sit and work out exactly how much you have to spend on each thing every month. For example, DH and I salaries both go into one account and that's the account all household bills come from. Pensions are deducted, school fee savings into one account, holiday savings into another account, house savings into another account, food and kids spend into another account etc. DH and I have an equal amount to spend each month. So if our monthly is £7k, we have worked out where that goes each month to the £, or at least what account it goes into .

Love this. My motto is, ‘Give every £ a job at the beginning of the month.’

We have monthly and yearly budgets we work with. Oh last day of every month I adjust the budget for the coming month, taking in to account birthdays/holidays/kids trips etc.

I then minus off all bills, savings and personal spends. Until I have no funds left to allocate. A zero based budget.

This means I know exactly how much each line item is my budget is allocated. For example we have a budget of £550 for groceries each month and once it's gone it's gone.

I think if you stopped using the credit card you'd be much better off.but gets very confusing as essentially your always working a month behind rather than a month in front.

And while you're getting £40 in vouchers every three months you're actually overspending by a few hundred pound each month so you're worse off.

Have a look at George Kamel. He's quite a funny watch and answers lots of the issues you raised around using debit cards online

You need to stop thinking of 3-5 years as being long term it will soon be here. We had a 10 year plan to pay off our mortgage early, and the time went by so quickly. Maybe you need to firm up some actual goals. Challenge yourself to save x amount, challenge yourself to get to the next 100 or £1000 in your savings. Almost like a competition with yourself

This was exactly the problem for us. The credit card had great perks, but we couldn't be trusted to stick to a budget. For example, getting £40 in vouchers every 3 months is not enough of a perk to justify going £700 over budget on other months. For me anyway. So in January we bit the bullet and switched to a preloaded debit card instead. Then there's only what's on the card, and we just can't overspend. It's a blow not getting the nice perks, but all in all we're saving more by not using the CC. Had to be done.