Doing These 2 Small Things Could Make a Huge Difference in Your Finances

It's often difficult to know where to start when making financial changes in your life. You probably know that you want to sock away more in savings, make progress on paying off debt, or put more money into a brokerage account -- and that you need to spend less to do it. But, figuring out how to act on your desire to improve your money situation is another matter.

The good news is, doing two simple things could make a bigger difference in your personal finances than you might imagine. Here's what they are. 

1. Cut or eliminate one fixed expense 

It can be hard to cut out a lot of little expenses because that involves making too many lifestyle changes that are unsustainable. But, it's not that hard to cut one fixed expense because you do it once and you're done. After you've reduced or eliminated that fixed expense, you'll keep benefitting from the savings and can invest the difference.

Say, for example, that you drive an expensive new car. If you could switch to a cheaper used car when it's time to buy your next vehicle, you could save a fortune. In fact, the average monthly payment on a new car was $717 per month in the last quarter of 2022, while the average monthly payment on a used car was $563. If you could free up an extra $154 per month to invest, you could end up with $105,850.93 after 20 years of steadily investing and earning a 10% average annual return. 

Other ways to cut or eliminate a fixed expense include:

• Switching to a cheaper cellphone plan 
• Eliminating one or two video or music streaming services
• Dropping your gym membership and exercising at home

2. Curb your impulse spending

Impulse spending is a major reason why so many people spend more than they should. In 2022, the average person spent a shocking $314 per month on impulse purchases, according to a Slickdeals study. 

If you could eliminate that, or even cut it in half, it could change your financial life. Consider what would happen if you invested $314 per month, or even $157 per month. If you earned a reasonable 10% average annual return and kept it up for two decades, you would have $215,812.20 or $107,906.10 if you only managed to cut impulse buys in half.

There are a few great techniques you can implement to curb your impulse spending, including:

• Shopping only from a list. This works really well for me to keep unnecessary purchases off my credit cards. I make lists whenever I go to the store and stick to them. I also have a master list of things I want or need in the upcoming month. If it's not on the list, I don't buy it. 
• Unsubscribing from marketing emails. I have taken myself off of email lists and opted out of getting catalogs in the mail. There's no reason to be tempted by marketing materials. If I need something, I'll know about it and don't need to see a catalog. If I don't need something, I don't need a promotional email to convince me I do. 
• Setting a 24-hour rule. If you do happen to see something that's not on your list, you can impose a 24-hour rule. If you still want it in 24 hours, you can go back and buy it. This has also worked well for me because often I don't want the item after thinking about it. And if I do, I know it's really worth buying. 

As you can see, implementing these two techniques alone can make you a lot richer, so give them a try as soon as you can.