Aviva Pinto is a CDFA, CDS and Managing Director and Wealth Manager at Wealthspire Advisors.
I am a wealth manager and help clients get control of their finances. Some of the people I work with are clients’ children going off to college for the first time, some are just starting out in their first jobs, some inherit money or have sold a business and have not had to deal with large sums in the past. Some of my clients are getting divorced and have to adjust to a new way of living or manage their finances for the first time, while others have recently lost a spouse and may not have been the ones managing their finances. In all cases, it is important to learn to budget and live within one’s means.
Some people feel social pressure to keep up with friends and family. I’ve heard clients attribute this to an expectation they or society places on them. Other people come into money or start earning more and increase their spending more than their higher income or what is sustainable. Some have never managed money and do not understand how to budget, save or manage bills and debt. To deal with stress, boredom or other emotions, some individuals overspend while shopping in person or online to satisfy a short-term desire. And, with credit easily available and not always tracked, it is easy to rack up credit card bills and spend money that isn’t available.
If you’re in any of these situations, it’s crucial to take control of your finances to avoid living above your means. This involves a combination of awareness, planning and discipline.
Know where your money is going and set financial goals.
One of the first steps I recommend is creating a budget. You need to track the amount coming in and the amount going out. More importantly, watch where the money is going. Categorizing your spending into needs, wants and wishes and putting aside money for emergencies, savings and investments are keys to long-term financial security.
Goals are important in this process, as well. I encourage clients to set achievable short-, medium- and long-term goals.
Use caution with credit cards.
Debt accumulation comes with fees and extremely high interest rates. Paying the minimum balance on your card each month will not get you out of debt. That’s why it’s so important to pay the full balance each month.
For some clients, I suggest using a debit card at first so they cannot spend more than they have. Once they have a good savings reserve built up, they can add credit cards. Establishing credit is good, but for those who struggle with overusing credit cards or are new to them, I suggest limiting it to a gas card so that spending cannot get out of hand.
Pay yourself first.
Another good way to save is to pay yourself first. Set up automatic transfers from your income to your savings or investment account. At work, maximize your contributions to your 401(k) plan. The money comes out before you have it—so you don’t even see it!
Pause before you buy.
It is also a good practice before making a purchase to consider whether it’s a need or a want. Impulse buying is in front of us on a daily basis: from pop-up ads and Instagram and Facebook temptations, to Amazon “sales” and window shopping. When you’re browsing online, put the items in your cart and go back to them in a day or two. Giving yourself time before deciding can eliminate impulse buying. Another idea is to make a shopping list of what you actually need and stick to it.
Cut out other unnecessary expenses.
Another way to cut back on expenses is to cancel subscriptions you aren’t using (streaming apps, subscriptions, etc.). Additionally, consider your food costs. If frequent eating out is cutting into your budget, try cooking at home more.
You could also consider selling items that are valuable but that you no longer want or need.
Review your spending and adjust as needed.
Reviewing your budget and making adjustments should be done regularly. If you see you are going over in a category that is not necessary, make changes to cut back.
Many online apps can help with budgeting if you are not handy with an Excel spreadsheet to do it on your own. For example, EveryDollar is good for those who want to be detailed with their budgeting. Simplifi by Quicken is particularly helpful for expense tracking and goal setting. YNAB (You Need A Budget) helps to simplify spending choices. PocketGuard helps users understand their cash flow and track expenses. Goodbudget helps you allocate funds for different spending categories and track your progress.
Learning financial literacy can help you make better decisions. As I recommend to clients: Aim to live below your means so you can invest the excess.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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