A lot of traditional budgeting advice tends to focus on eliminating the little luxuries in life that can add up over time, like that morning latte or weekly happy hour.
It’s true that you can save more by cutting out these types of costs, but there’s another factor you have to keep in mind: your own motivation. If you constantly feel deprived by your budget, chances are you won’t be motivated to stick with it long-term. (Plus, no one should judge you for needing a daily java kick.) If this sounds like you, it may be time to re-think your spending strategy.
“We call it ‘savor what you spend,’” says David Blaylock, CFP®, a financial planner with LearnVest Planning Services. “Spend on the things that you savor, that you enjoy, and don’t spend on the things you don’t enjoy.”
In other words, it is possible to cut expenses without nixing everything that you love. How? Start with these six pieces of advice below.
Take a look at your past credit card statements to see how much you’re spending in total on food (yes, that includes your Seamless orders). If it comes close to what you spend on your rent or mortgage, then you’re likely spending too much of your take-home pay on feeding yourself (consider that the average American spends about 12.5% of their total budget on food, according to the Bureau of Labor Statistics).
Before you balk, we’re not saying you have to put your social life on hold or cut the takeout completely. It’s more about trying to set a realistic weekly food spending amount that you can allocate however you’d like, whether that’s in a restaurant, a grocery store or on your delivery guy, Blaylock says. Finding the perfect number for you depends on the size of your family and food prices in your area, but you can refer to your past spending as a guide and pare it down from there. You’ll likely find that there are small things you can do to scale back, little by little, that won’t require too much extra effort.
The real benefit to having a weekly spending amount to wrap your head around is that it’ll make you more mindful of where your money is going. It may, for instance, make you realize that your salad-bar creations are triple the price of one you can make at home that’s equally delicious. You can then use those insights to make better food-buying choices.
How much you’ll save really depends on how strict you want to be with yourself. “You can save as much or as little as you want,” Blaylock says. “But either way, you’re probably better off than you were before just by being aware of it.”
You’ve heard it a million times, but adopting energy-saving practices can significantly reduce your utility bills, Blaylock says. Even if you already practice the obvious, like turning the lights off when you leave the house, chances are there’s room for improvement.
First, get in the habit of unplugging devices that aren’t being used. The Department of Energy says appliances such as TVs and computer chargers that stay plugged in when you’re not using them can add 10% to your utility bill. Want an effortless fix? Set up a few advanced power strips, which cut back on wasted energy. All in all, the switch could save you $200 a year.
It also pays to find out if your electrical company offers lower rates at off-peak hours. If it does, take advantage of this perk and do your laundry or run your dishwasher during those times, Blaylock says.
3. Nix Subscriptions You Barely Use
The ease of auto-pay and today’s subscription-crazed world has made it all too likely that you’re paying for services that you no longer need, or even use. Assess your current lineup by printing your last few credit card statements and reviewing any recurring payments. Spot any obvious places to cut? (For instance, do you really need Pandora and Spotify?)
Going on an unsubscribing spree might not seem like it’ll have a big impact, but these cuts could add up to a good chunk of change. “Forty dollars here, $10 here or $50 here, next thing you know we’re adding $400 to $500 a month back into your savings account or retirement account — and that’s real progress,” Blaylock says.
Between health, homeowner’s, auto, etc., paying for insurance can take up a huge portion of your monthly budget. The key to keeping your premiums in check is to be a smart consumer. Do your due diligence and shop around to make sure you’re getting the best rates or best deals for your money, Blaylock says.
Health insurance is in a category of its own that makes it tough to negotiate. But things like auto insurance that can creep up over time, sometimes after only two or three years, are worth revisiting periodically. “It makes sense to go check that premium against another competitor just to see what that rate would be,” Blaylock says, adding that he’s reduced his auto insurance premium by more than 25% by switching to a new company. “It doesn’t take more than your time to get a quote.”
You may not be able to live without your phone, but you still don’t want it to be the thing that drives your budget into the ground.
To get the best deal, make sure you’re on a family plan. No family of your own yet? Recruit your parents, siblings or significant other — it’s a good move even if it means Venmoing your brother directly for your portion of the bill, Blaylock says. For example, a family of four can access unlimited data for $45 each through Verizon, which is a much better deal than the $80 you’d need to spend when flying solo.
Speaking of data, take a look at your recent phone statements. Are you using all of your data? Or could you switch to Wi-Fi at home, downgrade your data plan and slash your monthly bill as a result?
Finally, think about how often you really need to upgrade your device. Most providers these days offer leasing programs, which break the price of the phone into monthly increments, typically over 24 months, rather than make you pay all at once. But that can tempt you to get a fancy new phone every two years — even if you truly don’t need it. “Just pushing that upgrade out another year and upgrading every 36 months instead of every 24 will reduce payments,” Blaylock says.
As with insurance providers, don’t be afraid to switch cell phone carriers. If one company offers the same service for half the price, it’s worth the effort to switch and you’ll never really know the difference so long as your service doesn’t get spotty.
Have you ever gotten a raise at work and immediately thought of how you would spend your new money, starting with celebratory champagne? It’s a slippery slope financial pros call “lifestyle inflation,” which describes the phenomenon of people super-sizing their lives when they increase their income rather than saving that extra money.
One of the big areas where we tend to spend our newly earned dough is on housing. “A lot of times we get into the trap of renting or buying a place that’s more than we need, whether that’s space or location or whatever,” Blaylock says. So don’t start packing the moving boxes as soon as the promotion kicks in; if your current living situation is perfectly suitable, then hold off on getting that sweet two-bedroom in the heart of the city until you start making some progress on savings goals.
If you’re already in a home where the payments feel burdensome on your budget, then it might be time to do some real soul searching. Weigh your current housing costs with your priorities (neighborhood, square footage and school district, for example). If you could get by with a smaller home or one that’s farther away from your ideal location — and you’re desperate to cut costs and save more — a move could be in the cards.
Of course, this would be a major decision, but think of it this way: Downsizing could help free up more of your money so you can simultaneously spend on the things you love and save for the goals you’ve got ahead of you — which, ultimately, is what your budget is all about.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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