Some form of money management is an essential skill for any financially independent individual. From saving your pocket money to planning how to spend your first salary, it’s something we learn and use throughout every stage of our lives.
As a result, most people understand the basic principles of money management: spend less than you earn, save what you can, and set financial goals. However, is there a balance between savings and spending? Is it better to save money or spend it?
Deciding between spending vs saving can be tricky, but it’s all about your priorities and finding the right balance between saving towards the future you want, without failing to enjoy the present.
By understanding what to spend your money on, you can improve your budgeting, develop smart financial habits, and enjoy a better quality of life.
In this article, we’ll explore the top tips to help you find a balance between spending vs saving, and get a handle on your finances.
Are You a Spender or a Saver?
One of the first steps to finding the right balance between spending and saving is understanding your financial approach.
Spenders tend to focus less on financial worries and are comfortable with spending money. This typically includes spending on luxuries as well as making impulsive purchases.
If you find yourself liking the finer things in life and making purchases instead of putting away your money, you may be a spender. You may be more comfortable with risk, which can lead to more of an investment mindset and taking on more debt.
In contrast, savers are typically more vigilant with their finances and often cautious about spending money, especially for their own enjoyment. They have a lower risk tolerance and a preference for a more frugal lifestyle.
It’s possible you might be both a spender and a saver. If you’re more of a spender, you may need to reduce your spending to achieve the right balance. However, if you’re more of a saver, you may find it more beneficial to allow yourself to spend more on things you need or enjoy.
Identifying whether you lean towards spending vs saving serves as a good starting point for creating a financial plan that works for you. By understanding your financial approach, you can adjust your saving and spending habits to support your long and short-term financial goals.
Spending vs Saving: Tips To Find the Right Balance
Becoming financially independent can be an exciting and overwhelming period in our lives. However, with a plan in place, you can ensure that you find the right balance between spending vs saving and enjoy yourself along the way.
Let’s take a look at some tips to help you get started.
1) Learn How To Budget
Once you’ve identified your financial approach, the next step to taking control of your finances is understanding your essential expenses through budgeting. By making a budget, you make sure you’re not living beyond your means and achieving your long-term goals.
Begin by assessing your monthly income. This is especially important if your income changes from month to month, for example if you’re self-employed or employed on an hourly contract. If you earn more than expected or experience a slow month, it could impact your budget for the following month.
Use a notebook, spreadsheet, or budgeting app to track your monthly financial obligations and subtract this amount from your income. This will include payments like rent, bills and debt repayments.
After factoring these key payments into your budget, examine your fixed-cost automated payments, such as a streaming platform subscription or gym membership, as well as any expenses like travel costs and food shops.
When you begin working on the next month’s budget, evaluate what worked and what didn’t. As time passes and your financial priorities change, make adjustments in your budget to achieve your desired results.
2) Allow Yourself Occasional Treats
Life is meant to be enjoyed. While it’s important to be financially responsible, it’s also important to spend some money on things that bring you joy or improve your quality of life.
If you prioritise saving over your social life or hobbies, you may not enjoy it as much. This can also lead to more impulsive spending that may affect your long-term goals.
Include a section for discretionary spending within your budget alongside essentials and savings. When it comes to spending vs saving, allowing yourself the occasional treat can help you save more money in the long run by giving you the encouragement to continue.
3) Eliminate Bad Spending Habits
It’s perfectly alright to treat yourself to the occasional fancy dinner or a new outfit now and then. While you enjoy these moments, remember to stick to your budget so that you can continue to treat yourself without any worries later on.
Whilst social media is filled with sponsored and aspirational content that influences people to spend more, despite what you see online, most people cannot sustain a lifestyle focused solely on luxury spending.
Be mindful of external influences and trends, or the fear of missing out (FOMO) that can impact your spending habits. By creating a money management plan and sticking to it, you’ll find financial stability and avoid bad spending habits that may land you in debt.
Choose Salad Money for Fair and Affordable Personal Loans
Finding the right balance between spending and saving is a journey that requires awareness, planning, and flexibility. However, once you build a balanced plan, you can focus on your long-term financial goals while enjoying your financial independence along the way.
At Salad Money, we understand that life isn’t always fair and that everyone needs financial support once in a while. That’s why we offer fair and affordable personal loans to support you through unexpected financial difficulties.
As a leading online UK lender, we offer the support you need when you need it the most. Our ‘More Than Your Score’ loans help you to access the money you need regardless of your credit score.
With our open banking-based system, we gauge your loan affordability based on your current situation instead of just your financial history.
What’s more, we’re an FCA-regulated organisation, so you can rest assured that your financial data is in safe hands
To learn more about our personal loans, click here, and to read more blogs like this one, visit our blog page now!
