Top tips when there's too much month left at the end of the money

Do you find yourself slipping into overdraft regularly, days before payday, wondering where all the money went?

Or perhaps you haven’t looked at the bank account in weeks. Money comes in, money goes out, and as long as you’re not at zero, it will all work out, right?

There comes a moment, however, when you hit a turning point in life, and with your money. You need something more, and it’s time to make changes.

Why lifestyles creep up and inflate

When you start out earning, there’s a funny thing that happens when you begin to consume the things new money can buy – they start to become regular everyday expenses.

This is classic lifestyle creep at work. Like helium inflating a balloon, spending somehow expands to match your increases in income. It takes up whatever room it can find, pushing in all directions until your budget dangerously nears the popping point.

There’s only so long that can go on.

When you’re at a turning point with your money

There’s a key moment that tends to happen in our financial lives: when we realise we need to do something radically different to get the outcome we’re after. It generally happens because we want something better and are ready to do whatever it takes to get there.

For both Becca and Minna, their own turning points came because of travel. Minna and her partner decided to head overseas, so had to make heaps of changes in order to make that happen.

For Becca, a good friend called, having just gone through a relationship breakup and urgently wanting her to come on holiday with her. It was a bridge too far, even when Becca tried to extend her credit line with her bank to pay for it. “I tried, and because I’d lived in my overdraft they wouldn’t do it,” she remembers.

“It was at that moment that I realised that if something more serious was needed, the bank wouldn’t extend credit,” she says. “What happens if that were my car? Or a family member got ill and I needed to pay for medical treatment?

“I need to be in the plus,” she remembers telling herself. “I need a great credit score to be able to be approved if necessary.

“That was my turning point – having something I wanted to do, and not being able to do it. It changed my mindset. If I can’t afford something I want to do, then I can’t afford something I need to do.”

Time to look in the mirror

Making changes can be confronting, because we have to examine what we’re actually doing by tracking our spending. Yet the only way out is to have a good hard look at what's happening with your money, and then to make changes.

“You have to almost face yourself,” explains Minna about going through daily expenses. “It is going to tell a story. It might say that you eat out a lot, or spend on clothes.”

She adds: “Sometimes we feel this deep shame, but no one knows but you. Remember, no one else is going to judge you but you.

“And you don’t have to change everything at once.”

Cutting back to build an emergency fund

As Becca re-evaluated her position, she started making changes in the way she spent money on food. “I didn’t need to be eating out all the time at expensive cafes and pret-a-manger baguettes,” she remembers. She started prepping her meals ahead of time, keeping coffees to the office and skipped weekend travelling, treating herself to meals for special occasions only.

She stopped using her overdraft entirely.

It's one thing to cut back and just spend less, but the saved money needs to be funnelled into a separate account. Becca started with an emergency fund so she’d have a safety net.

“Smoking was a big thing,” she remembers. Each time she would cut back, she would put the amount saved into her separate account.

She also saved her typical spend from a Friday night out. “It took money out of the day to day, and made things more like a treat than an expectation.”

She proved she could turn her finances around. “It was more of a challenge to myself,” she says. “It was competing against myself so that someday I could have some money, a healthy competition to prove it to myself.”

That was 10 years ago, and although there have been ups and downs along the way, nowadays she is set to handle unexpected car repairs without worry, or to fly home overseas if her family needs her.

Looking for ways to save even more

“When I first started saving for traveling, that was when I started making changes to my lifestyle,” Minna says. She and her partner set a goal to raise $24,000 to travel – $12,000 each. “Personally, I had to start setting up those goals, and long-term and short term accounts.

“When the money started building, I was like, ‘Why can’t I put more in?’ And that’s when I started looking at what I spend money on.

“It’s about being less impulsive, and deciding what to cut. I really look at where I’m spending, like, ‘Am I getting a smoothie every day?’"

One thing that helped her decision-making was to target those everyday items. “Things you do infrequently but it’s a big expense, like getting my hair done, get prioritised over things I could do anytime, like go out.”

It also helps her to ask, “How much does this bring me long-term joy? How much does this bring me short-term joy?” Here’s more when you’re asking how happy your spending is.

Following are more tips from Becca and Minna for when you get to your own turning point.

7 tips to stop going from pay to pay and get to your goals

1. Take a good hard look at what’s happening with your money.

Use the past to predict the future by going through three months’ of your spending. Look for patterns, make cuts, form your new plan. Our budgeting tool can help.

2. Start with small wins that are simple and achievable.

Even if you’re just forgoing a daily $10 smoothie, it can get you started and add up to something significant over time.

3. Take what you would’ve spent typically and funnel that amount towards your goals.

Whether it’s for your big night out or other regular habits like vaping, make sure to flow the money you save from skipping them into your separate accounts.

4. Build your emergency fund, so you don’t have to rely on credit when the unexpected happens.

It helps to build your safety net first. Sell stuff, become a TradeMe expert, whatever it takes. This is especially good for those of us on more unpredictable incomes.

5. Make food go further.

Hack your food shopping by stocking up week one, and then topping up week two. “Stockpile rice, pasta, tins, household items,” Minna advises. “In case you’re caught short, you have it there and don’t have to stress.”

6. Get a system going.

A separate account for bills works well for many. Then, set some goals for the short (1–3 years), medium (4–9) and long terms (10 years plus), with separate accounts to flow money into.

7. Be open to others’ support.

Says Becca: “Don’t be embarrassed to say, ‘This is my skinny week. I can’t come out with you.’ It’s nothing to be ashamed of.”