The best ways to avoid running out of money too quickly involve sticking to a budget, reducing your cash outflow, and increasing your cash inflow. Running out of money is a common concern for many, often caused by unexpected expenses, poor budgeting habits, or insufficient earnings. The stress of financial insecurity can be overwhelming, but practical solutions exist to stretch your dollars further and avoid draining your wallet.
If you find yourself anxiously checking your bank balance and wondering how you’ll make it to the next payday, don’t worry. In this article, we’ll explore the 8 best ways to avoid running out of money fast, offering straightforward, actionable tips to help you manage your finances more effectively.
1. Create A Budget and Stick to It
Creating a budget is the cornerstone of financial stability. If you want to avoid running out of money too quickly or learn how to live on less, start by creating a budget and sticking to it. The 50/30/20 rule is a simple yet effective budgeting method that allocates your income into three categories:
- 50% for Needs: Covers essential expenses like rent, utilities, groceries, and transportation.
- 30% for Wants: Includes non-essential spending like dining out, entertainment, and hobbies.
- 20% for Savings: Dedicated to savings and debt repayment.
By adhering to this rule, you can ensure that your essential needs are met while still allowing room for discretionary spending and savings. Tools like budgeting apps can help you track your expenses and stay on course.
2. Automate Your Savings
Automating your savings can be a game-changer in building your financial cushion. Set up automatic transfers from your checking account to your savings account each month. This ensures that a portion of your income is saved without the temptation to spend it. It can also help you build an emergency fund, save for a vacation, or accumulate funds for a down payment on a house.
Extra Tip: Automate transfers to a high-yield savings account in order to take advantage of compounding interest and maximize your earnings over time. This simple strategy can help you grow your savings faster and reach your financial goals sooner.
3. Prioritize Paying Off High-Interest Debt
High-interest debt, like credit card balances, can quickly spiral out of control if not managed properly. Bankrate reports that 49% of credit cardholders carry debt from month to month, and this may get larger with the accumulating interest. So, focus on paying off these debts as soon as possible to avoid excessive interest charges.
One effective strategy for repaying debt is the avalanche method, in which you prioritize paying off debts with the highest interest rates first while making minimum payments on others. Consider consolidating your debts into a lower-interest loan, which can reduce your monthly payments and total interest paid over time. Freeing yourself from high-interest debt will provide more financial flexibility and peace of mind.
4. Minimize Restaurant Expenses
Eating out frequently can significantly drain your finances. Cooking at home is a cost-effective alternative that not only saves money but also allows you to eat healthier. Plan your meals ahead, prepare grocery lists, and take advantage of discounts and coupons. Preparing your meals in bulk and freezing them can also save time and money in the long run.
If dining out is a must, try to reduce the frequency or look for deals and sales. Additionally, use cashback or rewards credit cards that offer benefits for grocery and restaurant purchases, but always pay off the balance in full to avoid interest charges.
Here are some credit cards that offer benefits for groceries:
- American Express Blue Cash Preferred® Card: 6% cash back on groceries for up to $6,000 per year at U.S. supermarkets.
- American Express Blue Cash Everyday® Card: 3% cash back on groceries for up to $6,000 per year at U.S. supermarkets.
- Citi Custom Cash® Card: 5% cash back on your highest-spending eligible category each month, including grocery stores.
- U.S. Bank Shopper Cash Rewards™ Visa Signature® Card: 6% cash back at two retailers you choose, including Target and Walmart.
Here are some credit cards that offer benefits for restaurant purchases:
- Capital One SavorOne Cash Rewards Credit Card: 3% cash back on dining for up to $5,000 per year.
- Chase Freedom Unlimited®: 3% cash back on dining at restaurants.
- Chase Sapphire Reserve®: Earn 3x points on dining.
- Bank of America® Customized Cash Rewards Credit Card: 3% cash back in a category of your choice, including dining.
5. Cut Down on Transportation Costs
Many people spend a significant amount on transportation. To cut costs, consider using public transportation, carpooling, biking, or even walking when possible. If you drive, maintain your vehicle regularly to avoid costly repairs and improve fuel efficiency.
You can also save money by comparing insurance rates and opting for a fuel-efficient vehicle. For those who live in areas with reliable public transportation, selling a second car or even going car-free can lead to substantial savings.
Extra Tip: If feasible, explore telecommuting or remote work opportunities to save on commuting costs. Data shows that employees can save between $600 and $6,000 per year by working from home half the time, primarily due to reduced expenses for travel, parking, and food.
6. Cancel Unnecessary or Unused Subscriptions
Subscription services, while convenient, can add up quickly without you realizing it. Review your subscriptions regularly for streaming services like Amazon Prime and Disney Plus, gym memberships, magazine subscriptions, apps, and other recurring expenses. Cancel any that you do not use frequently or can live without. This can free up a significant amount of money each month.
Use tools or apps to easily monitor and cancel unwanted subscriptions. Cushion, for example, allows you to effortlessly track all your subscriptions, giving you a clear picture of where your money goes each month. By organizing your recurring expenses in one unified view, Cushion helps you identify which subscriptions are necessary and which you can do without. This way, you can make informed and smarter decisions about your spending.
7. Increase Your Income
Boosting your income can provide more financial flexibility and reduce the risk of running out of money. Try taking on a part-time job, freelancing, or monetizing a hobby. Additionally, look for opportunities to advance in your current career, such as asking for a raise, seeking promotions, or joining seminars for certifications.
8. Do a No-Spend Month Challenge
A no-spend month challenge involves not spending money on non-essential items for a full month. This can help you reset your spending habits, identify unnecessary expenses, and save money fast while living on less money. Use this time to find free or low-cost alternatives for entertainment and other activities.
To help you get started, here is a 30-day no-spend challenge template you can use to track your progress and stay motivated.
Extra Tip: Document your progress and reflect on your spending habits to make lasting changes in your financial behavior.
Summary
Avoiding running out of money requires a combination of strategic planning, disciplined spending, and proactive saving. By creating a budget, increasing your income, prioritizing savings, and minimizing expenses, you can achieve greater financial stability and peace of mind. Implement these best ways to avoid running out of money too quickly, take control of your finances, and secure your financial future.
