Budgets are the best way to keep track of your money. I don’t mean writing on a piece of paper what you want to spend this month but rather, knowing how you’re spending your money and what your spending habits are, as a key to proper financial management, savings, and the creation of long-term financial goals that you can attain. That budget.
Just about a year ago I wrote several posts teaching you how to make your own budget from start to finish. To date they are the most popular posts on Money and Stuff, and I’m glad, as it means that over time, some of you got into the habit of managing your money in an organized manner.
This spring I thought I’d teach you small ways to spend your money to save. That’s right.
But don’t go on a shopping spree just yet.
First, prioritize
You know by now that the three main areas of your budget revolve around the things we cannot do without: eating, living somewhere (includes utilities), and getting around. If you aren’t living beyond your means, these three put together should take roughly 2/3 of your monthly money. If you make your own budget, you will be able to tell this and how close you are to it. If you are going far past this ratio, I recommend taking a closer look at:
Where you live; I hate to say this but many people live someplace because it’s pretty or modern, or considered upscale. If you spend more than one third of your income on housing alone, you are living beyond your means. While you may be able to afford it, it is going to put a damper on savings. Also, check your energy consumption: learn turn electronics off at night and when you’re out, because standby mode still consumes 3-5% of the energy the device would spend while on. Unplug chargers; they continue to use electricity when plugged and not in use. Check to see if your heating and cooling tastes could be tempered.
Your mode(s) of transportation; is your driving and parking breaking the bank? Join a rotating car pool so that some days you won’t even have to drive to the office. You will save on gas and time that you could use to put your brain to different use.
Discretionary income
Either way, after those expenses are addressed, you will still have expenses that you want to have every month: gym, social things, and hobbies, whatever. While these things are a part of life and you should continue with them, it doesn’t hurt to examine your expenses to see if there are ways in which you could save. I recommend that for a month or two, you make a point of tracking down all your discretionary expenses: fitness, entertainment, coffees out, small shopping excursions that are not for necessities, all those things. Keep track of them and then break them into clear categories. You might be surprised to find that your money was not going to afternoon coffee but to too many happy hours. But there are other ways to improve spending overall, using a little bit of ingenuity and discretion on how you shop.
A gym that is within walking distance of home or office will save you on transportation costs to the mega-gym that requires a 20 minute drive. The idea is to use common sense to see if there’s a way to maintain your habits, at a lower cost. Try to buy seasonal sports gear at the end of the season to take advantage of inventory reduction sales. If you love to read, instead of buying new books always, consider being good to the environment as well as your pocket and check out used book stores. And if you can’t do without those small shopping expeditions, those window shopping days when you always pick up something anyways, consider going into a thrift shop now and then. They can be real treasure troves.
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