I’ve written often about the value of changing routines. Eliminating a routine that involves spending money needlessly, or substituting a different routine that involves spending less money, is a great way to cut your spending.
In fact, any time you make a choice to reduce your spending, you’re taking a powerful step in a financially healthy direction.
But it’s just a single step. Alone, reducing spending cannot bring about positive financial change in your life.
Let’s say that, much as I used to do, I visited a coffee shop each morning and spent $5 on coffee. I realized that this was something of a waste of my money, particularly given how I didn’t really enjoy each visit – it was just pure routine.
So I gave up that routine.
Suddenly, I’m spending $25 less a week – $100 less a month. That change in behavior made a big change in my money, right?
I could easily take that $25 a week and just do something else unnecessary with it. Since I have all of that free money now, why not buy an extra book or two at the bookstore once a week? Why not pick up a couple bottles of great dinner wine on Fridays? Why not go out to dinner on Saturday night?
After all, because I’m not spending as much, I have the money.
So I start spending that $25 a week on something else – and I’m right back where I started, just making ends meet.
Merely cutting your spending is not enough. You have to do something financially productive with that money.
So let’s rewind the clock. I make the choice to kick the coffee shop habit, trimming $25 a week from my spending.
Immediately, I set up an automatic transfer from my checking account to my savings account – $25 a week.
Then, at the end of each month, I scoop that saved $100 and put it towards my debt. Or I leave it alone and forget about it, knowing it’ll serve as an emergency fund. Or I start putting $100 a month into my Roth IRA. Or I keep adding more to it, saving up for a house down payment in a few years.
The first action – the one of avoiding spending – is powerful, indeed. It gives your finances breathing room. It frees up your money to be used for other things.
The second action, though, is the deal maker. When you choose to take that free money and put it towards something financially productive, that’s when real change begins to happen in your life.
Keep that in mind this week. Try to find one significant way to trim your spending. As you pass through the days, look for areas where you’re spending more than you should and not really getting value from your dollars.
If you figure out a thing or two, that’s great! But it’s just the first step. Go the rest of the way – figure out how much you save from that positive move, then invest that money in something financially positive in your life. Steer it into a debt overpayment. Put it into your emergency fund. Stick it into your 401(k) or a Roth IRA.
Do something. Move forward. Turn your positive personal action into a positive financial one.