Did you know? Approximately 73% of online shopping customers say they prefer online shopping because it saves them time.
Whether you usually prefer online shopping or you’d rather run errands to your local stores, tracking the money you spend is an essential part of financial planning. You shouldn’t rely on loans or credit cards for everything, which is why it’s important to allocate funds across different categories — whether you’re buying auto parts or lawn services like tree stump removal.
There’s a lot more to allocating money than just budgeting for routine expenses, though. Maybe you have an expensive product you want to buy or an investment you want to make. It could be that next big online shopping purchase. Or it could be investments like getting fire sprinkler installation, or even purchasing custom business signs for your company. Whatever it is for you, if you’re used to losing everything you earn on expenses, you won’t have any extra money leftover for spending.
If that’s the case, then you need an allocated spending plan that lets you set money back for these major expenses. The next time you must save up for genuine Mercedes Benz parts, refer to these tips for allocating your money before a major purchase.
Find Out How Much You’re Making
The first step to allocating your money is knowing how much you have to work with. You should budget for your pay period, whether it weekly, biweekly, or monthly. If you get paid every week but you have a monthly budget, some months you’ll receive five paychecks and other months you’ll receive three. This is why it’s important to plan your spending based on your payment schedule.
Allocate Your Spending for Each Pay Period
Once you know how much you’re making and at what frequency, list the expenses and payments you have to make during different pay periods. This is easiest if you’re employed full time and always work the same hours, such as if you’re a mechanic working for a car dent repair service. Most employees get paid every week. If you’re a business owner performing different types of fire protection services for clients, your payment periods and amounts may be more complicated. Either way, the important thing now is to know what expenses have to be paid between paychecks.
As an example, if your mortgage is automatically paid on the 15th and you get paid every two weeks, then money you receive at the first of the month will be used for that. If you always buy your groceries in bulk near the end of the month, then the money you get paid around the middle of the month will be allocated for that.
Allocate Money Into Savings
Even when you aren’t saving for a major purchase, it’s a good idea to allocate money you earn into a savings account as well. Again, if you have a steady income this is easy: the same amount will always go directly into your savings account, which can be set to happen automatically. If you’re self-employed or have irregular income, then whatever money you earn above your expenses should go into savings.
Since you’re allocating your money to make a large online shopping purchase or investment, your savings will be a special priority right now. Once you know how much you have to spend on expenses, you should make it a point to avoid spending any extra money on anything unnecessary until you’ve reached your goal. You should also consider looking for ways to earn extra income. Returning to our fire protection service example from earlier, this would be a good time to look for more clients who need fire alarm service.
We’ll discuss strategies for setting back extra money later on.
Optional: Allocate Fun Money
Depending on how serious you are about reaching your current savings goal, you may choose to skip this step for now. However, whenever you start budgeting your income for the long term, you will want to be sure and set aside some money for spending on enjoyable things.
Ask anyone who’s ever dieted successfully, and they’ll probably tell you that self-discipline isn’t everything. No matter how determined you are, if everything you do is for work and self-improvement, you’ll eventually burn out. In addition to exercising discipline, it’s necessary to give yourself little breaks and rewards for work done well — whether your challenge is dieting or saving money.
For now, you may be so excited about whatever you’re saving money for that the reward is in the act of saving itself. And that’s great! But know that once the novelty wears off, you’ll need a more sustainable plan for allocating your money. That kind of plan involves setting aside spending money for you to enjoy, as well as budgeting the rest of your income wisely.
Write Down Your New Plan
If you’ve been following these instructions, chances are you have several notes and calculations scribbled down on a notepad, or typed up on your computer. Either way, now it’s time to take those ideas and polish them into a complete formulated plan for you allocated spending.
If you’re the technical type who’s more comfortable with a screen than they are with paper, you can use a spreadsheet to lay out your new financial plan. If spreadsheets are too complicated for your liking, it’s also acceptable to simply write it out in a text document. If you do a little research, you can easily find some helpful templates for financial plans that you can fill in. You could even find some examples of financial plans that other people have made for referencing. And of course, if you’d rather just write your plan out neatly on paper, that’s okay, too.
Keep in mind that an allocated spending plan is meant to be somewhat flexible. Even if you enjoy a steady income where all the paychecks are for the same amount, you never know when your expenses will fluctuate unexpectedly, or when you might receive some extra income from somewhere. This is where spreadsheets especially come in handy: they allow you to quickly tweak specific details within your financial plan without having to rewrite the entire document.
There are many benefits to having a clearly written-out plan for you money. First of all, it forces you to be honest with yourself about your spending. Perhaps most importantly, having a written plan helps you see whether or not you’re effectively preparing for your financial future. If you find that you aren’t putting enough into your long-term savings for your retirement, you can do something about it now, before it’s too late.
Tips for Working With a Variable Income
If your income changes slightly from pay period to pay period, then you probably know how difficult it can be to keep a budget. Being in a career with flexible income or having multiple income sources can lead to complications when it comes to making an allocated spending plan.
To work around this, separate your fixed monthly expenses from your flexible monthly expenses. For example, your mortgage payment, utility bills, and insurance costs probably stay the same from month to month. Money you spend on groceries or online shopping, on the other hand, are slightly more flexible — if you have extra money that month you may spend more, but you can also spend a little less if you have to. Then there are expenses which depend totally on how much you want to put towards them that month, such as credit cards and charitable donations.
Recognize that, no matter what happens that month, you must make at least enough money to cover your basic expenses, such as groceries and online shopping. They’re set in stone. But any money you make in addition to these fixed expenses can be divided between your flexible expenses. So instead of choosing a dollar amount to put towards retirement accounts, college funds, or your church, you can choose to put a percentage of whatever money is leftover after fixed expenses. Since the percentages will change based on how much you earned, this results in an allocated spending plan that’s compatible with a fluctuating income.
Having a plan for your money is essential to feeling in-control. This is true all the time, whether you’re saving for a big online shopping purchase or not. But since we’re specifically discussing allocating money in preparation for a major purchase, next we’ll discuss some ways to reach your savings goals quickly.
Checklist: Ways to Save Money Towards a Goal
There are lots of ideas floating around the internet that you can try for saving money. Here we’ve gathered together some of the top suggestions to get you started. You’ll be crushing your financial goals in no time with these tips:
- Estimate the cost of the purchase and keep it in mind. Products you buy with online shopping may change from time to time. Or you may not be sure what that display wall you want to invest in will cost. But all the same, have a specific number in mind to save up to, so you know when you’ve reached (or surpassed) your goal.
- Determine how much time you have to save. Once you have a deadline in mind, then determine how much money you’ll have to set back each pay period. No matter what else you spend on, this is the amount you must set aside in order to reach your goal on time.
- Set up a separate savings account. Since you’re setting back extra funds for something special, use a different savings account from the one you normally use. No matter what, don’t leave this money in your checking account — it is not to be spent.
- Forgo ordering drinks when you’re out and about. Maybe you never go to town without getting a coffee, or maybe you drink a lot of soda. Either way, the cost of drinks adds up fast, and they don’t do much to fill you up, so they have little practical value. As long as you’re trying to set money back, consider avoiding costly drinks for a while.
- Pack your own lunch and avoid eating out. Bringing your own meals to work could save you as much as $10 per day. Even if you would never eat out every day anyway, the next time you do feel tempted to get fast food, remember your savings goal.
- Find free and low-cost forms of entertainment. Whatever does anyone do on weekends if they’re not spending money? If that’s what you’re asking while reading this, then it would be a good idea to answer that question for yourself. Do some research on ways to enjoy an evening or weekend without the aid of expensive movie tickets, restaurant dinners, or quick shopping trips. Try window shopping at the mall without giving into the temptation to buy anything. Or maybe return to the titles in your home movie collection instead of paying to see something new.
- Cut the cable (bill). Some television service subscriptions cost more than telephone service. Maybe you can’t bring yourself to cut all your spending on entertainment, but if you don’t absolutely need your cable TV plan, that should be the first thing you give up. You can resubscribe when you’ve finished saving up for whatever online shopping purchase or investment you need to make.
- Plan ahead before traveling. Gasoline costs, parking fees, and toll roads can really challenge your pocketbook, and your savings. If you deal with a lot of these expenses regularly without thinking, try coming up with creative solutions to get around them next time. Maybe the bus or train would be cheaper than gas and parking combined. Or perhaps you can carpool with a friend from work for a few weeks.
- Compare rates on insurance and credit cards. You may be content with the bank fees and insurance costs you’ve been paying already, but there might be a lot of money lying there to take advantage of. If it’s been a while since you compared your options, get in touch with your bank or credit card issuers to make sure you aren’t paying any fees, or to have any fees removed. Get in touch with that new insurance agent in town everybody’s been talking about and see if they can give you a deal on home or auto insurance.
- Watch out for vampire subscriptions. If you’re like most people, you probably have a paid subscription to at least one or two streaming services. But do you really get your money’s worth out of them? If you have a Netflix or Spotify subscription you’re paying for, but you never find the time to watch TV or listen to music, consider canceling them.
- Pay down your revolving loans. It may seem counterintuitive to focus on paying off debts while you’re trying to save, but if you have high credit usage, the interest might be eating you alive. If the interest in revolving loans is sapping up the money you could be saving, then it might be an even more important priority than your savings goal.
From minimizing your spending on online shopping to organizing your money, these are some of the best tips for allocating your money for a major purchase.