Updated 24 January 2018
Every day you may be dolling out dough unnecessarily. Kusal Ariyawansa explains the ‘six-month rule’ and gives us some easy ways to claw back our cash.
Previously I explained why it is a sin to pay others your hard-earned money, advocating a prudent approach to monthly expenses. Not only is this important in its own right, but it also is the first step towards financial strength and security. The next key stage in this process is to apply the same rationale to your everyday expenses. By applying this approach in all your finances you will reap the rich rewards that come from shifting your mindset concerning money.
“Every saving you make is another step on the journey towards stability, prosperity and happiness”
Take care of the pennies and the pounds will take care of themselves
To start with, we must realise that everything is dependent upon its smaller components: every penny wasted or saved alters the overall picture. Paying close attention to your finances is therefore fundamental to your long term success. It is a particular mindset (as I will explain below).
Ring ring… ker-ching!
Mobile communication costs are a classic example of this. Many of us have mobile phone contracts which give minutes and data, as well as a funky smart phone which seems to be able to predict our every move. At around £50 a month, is this really something we need or just another one of those expenses we take for granted?
Fancy saving £300 a year?
A quick analysis of how many minutes you actually use, sim-free costs, migration to data and wi-fi instead of texting friends abroad could halve the monthly expense – which means a saving of £300 a year. The same principle applies across the board – from utility bills to your TV package.
The six-month rule
For these outgoings you should be mindful of the ‘six-month rule’ – if you live with an expense for six months or more you grow accustomed to it. It is therefore vital to adopt a proactive approach, taking advantage of competition forcing prices down to maximise net income and avoid becoming resigned to expenses as time passes. Unfortunately, if left unchecked for months, or even years, this wastage can grow to unmanageable proportions.
Cash in with cashback
People who are good with their money (those getting the most out of their hard-earned cash) will go as far as making the majority of their transactions through cashback sites. One of the most effective ways to cut unnecessary spending is to make as many transactions as possible through cashback sites. These provide links to major retailers where you buy the product as normal, but a few weeks later you receive a percentage of your spend in the form of a cashback. Paying for the desired product through a credit card that also gives cashback means you get even more. While this might appear to be excessive effort for pennies, the savings quickly add up and the average payout can be up to £316 per year.
Saving trumps spending
The key lesson here is that the cumulative value of any wastage or savings can rapidly become significant. Not only does this alter your finances, but also it changes your mindset as you begin to fine tune expenses to your advantage, rather than simply accepting them. If you want to truly benefit from your hard earned money, you should pay close attention to your finances and ensure that any wastage is eliminated. The key to achieving this is to alter your outlook, prioritising saving over spending. Every saving you make is another step on the journey towards stability, prosperity and happiness.