BEFORE the Holidays, Start Cutting Back

It’s always smart to control your spending. But — especially the spendy holidays — if you or others in your family are facing difficult times financially, perhaps from a job loss or wage cuts, it is especially important to spend less so you can have more money to pay essential bills or to add to a savings account you can tap in an emergency. Here are some strategies.

Take a serious look at your spending. As a first step, think about creating a spending plan. Make a list of your monthly expenses divided into two groups — your “needs” and your “wants.” The needs are expenses that are absolutely necessary, such as your housing, utilities, clothes, food and transportation. The wants are optional purchases. Don’t allow this “budget”, however, to paint a false picture of your true financial condition. (For more on the budgeting myth, sign up for the free Protege course at DebtFree Academy to learn about the dangers of budgeting.)

“After you differentiate between spending for needs and splurging on wants, cut back on the second category, especially if you’re already suffering an income loss or other financial hardship,” said Luke W. Reynolds, Chief of the FDIC’s Community Affairs Outreach Section. He said possible places to cut back on unnecessary spending include restaurant meals, monthly subscriptions, and premium TV channels.

But also consider opportunities to save on your necessities. Examples from experts and consumers alike: Try carpooling or taking public transportation to work instead of driving by yourself. If you have multiple cars, see if you can live without one of them. Ask yourself if you really need those $200 sneakers or if a less expensive pair will do just fine. Buy used instead of new. Take better care of what you buy so it will last longer. And, make your own coffee at home and bring your lunch to work instead of eating out.

Finally, don’t use your credit cards or other loan products to buy things you really can’t afford.

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