by Beckie Knowles

Created on: August 23, 2009   Last Updated: August 24, 2009

It's easy to say "I need to cut back my spending". However, the reality of reigning in your outgoings is much more tricky. The first step to saving money is budgeting. Using a simple piece of spreadsheet software, such as Microsoft Excel, makes working out your household budget much easier.

Once you have put in all your income and outgoings, you can easily see how much money you have left over. Difficulties arise when your income after reductions looks like a nice, large sum of money. This tricks you into thinking you can treat yourself or be over indulgent in the food shopping, when really every penny counts.

Create three bank accounts; a debit card account, an online only savings account and a high interest rate savings account. Having separate places for your money will prevent you from spending money you need for bills, food etc. Only carry around your debit card with you. You'll only have a fixed amount you can spend and, unlike a credit card, you can't splash cash you don't have in your account.

Set up all your bills and standing orders to come out of your online only savings account. There is no card for this account and you must control it yourself through online banking. I suggest you also ask for your income to be paid into this account. Although this requires you to remember to transfer money onto your debit card to spend when you go food shopping etc., it will also make you more aware of how much money you have so you are not tempted to go over budget.

Also make sure you start saving money in your high interest savings account on a monthly basis. Getting into the habit of putting aside a set amount, variable on how much you can afford, will be rewarding in both interest and a big treat that you work towards, such as a holiday or home improvement. Rather than spending money you don't have on a regular basis, you learn to earn your treats. You'll appreciate them much more this way.

Finally, always consider whether a purchase is a want or need. Do you really need this to survive? For example, the importance of a new washing machine is increased if the old one is broken, rather than a bit old. Also, when buying necessities such as clothes, choose quality over quantity. Ensure you are getting good value for money. Buy less often but of a higher standard so it lasts longer. It's friendly on your wallet and the environment too.

Spending money you don't have is a problem everyone faces from time to time. However, if you start working to a budget and separate your finances into convenient bank accounts, it is much easier to see where you are over spending.

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