We all wish we could stretch our household budgets at least a little bit further. Unfortunately, for most of us, at first glance, it seems like every penny is already spoken for – sometimes by multiple expenses! It’s so easy to get bummed out and think that the only way to make our money go further is to win the lottery or for some monetary miracle to drop into our laps.
Here’s the truth: There are ways to stretch your budget. There are ways to pay down your debt and pay in to your savings at the same time. Here are just seven of those ways.
Decide What Really Matters
We all have those things we know are supposed to be important to us, and that’s where most of our money goes: big home, lots of gadgets, etc. But who says that the things that matter to your parents or that your friends tell you are important have to matter so much to you?
Maybe you love food and only want to cook with the freshest and highest quality ingredients and you enjoy going out to dinner and trying new dishes. Maybe you love to travel and spend very little time at home, preferring to take as many vacations and trips as possible. Maybe you love media and would rather watch a movie than do anything else.
It’s okay to love these things, even when you’re trying to be frugal. The trick is to figure out what matters to you and commit to it.
Track and Plot Your Actual Spending
Sure, there’s that phenomenon where you change a thing just by observing it. Still, track every penny you spend over the course of a month. Don’t scrutinize it as you track it – just write it all down. Save all your receipts. You can’t figure out where to cut and shift if you don’t know where your money is actually going. You might not be spending the way you think you are.
At the end of the month, sit down and look at where your money is actually going. Write it down the same way you wrote out your budget. Compare the numbers. Chances are you’ll start to see plenty of waste that can be cut and trimmed.
Now it’s time to build a new budget.
Starting Over
The first part of this is to add up all the things you absolutely have to pay for every month and how much you have to pay for them. This, believe it or not, is where you’re going to start finding ways to both reduce what you’re sending out and find money to put in savings.
How much are your utility bills every month? Add $10 to that number in your budget. For example, if your electric bill is usually around $45, round that up to $55. Write down the rounded up number in your budget.
How much are you paying on your credit cards? Are you paying an excessive amount because you’re trying to be aggressive with your debt? That’s awesome, but just for now, while you’re figuring out your baseline budget, write in your minimum monthly payment plus 20%. Don’t freak out – you’ll see what we’re doing in a minute.
Write down these numbers with your rent/mortgage, your car payment and insurance, and any other fees you have to pay regularly (union dues, etc.)
These – your shelter, transportation, utilities, and debts – are the non-flexible numbers. Everything else is variable.
For example, if you’ve budgeted a bunch of money in the past for dinners out, expensive clothes, etc., but you’re truly a homebody who loves to cook and wants to pay down her debt – you can start shopping at thrift shops, reduce your weekly dinners out to a monthly dinner out, and reallocate those funds to your grocery budget and credit card bills.
So where do the practical savings come in?
1. Remember how we told you to over-budget for your utilities? Every month, as you pay your electric, gas, cable, phone, whatever – take the difference in what you budgeted and what you paid and put it in your savings account.
2. As you pay off your bills, take 50% of that monthly payment and spread it out over your remaining debts. Put the other 50% into your savings account.
3. If you’re able, consider downsizing (this is admittedly easier to do before you have kids). Smaller spaces are cheaper to maintain. You can sell the things you no longer need (this is a separate article for another time). Use 50% of your profit to further pay down your debts, and put the other 50% in your savings account.
4. If you live in a larger city, consider selling your car and, instead, traveling via bicycle and public transport. The profit from your car will more than pay for a good bicycle and safety equipment and a monthly transit pass. Use 50% of whatever is leftover to pay off debt and put the other 50% in savings. Distribute what you would have paid for your car insurance across your other bills to help pay them down faster.
5. Make more things from scratch. Making things from scratch is easier than it sounds. It saves you a ton of money. And, because it takes more time, you won’t have as much time left on your hands for things like going out and spending money.
6. Thrift shopping has already been mentioned as a way to save money on clothes. It’s also great for decorations and furniture (but never bedding or couches – yuck!). Take this one step further and learn how to repair rips, tears, and holes in clothing so it will last longer.
7. Embrace the library. If you haven’t been to the library in a long time, it’s time to go. Libraries aren’t just for books anymore (though they still have plenty of those). Now you can check out books, music, movies, and in some locations you can even rent video games. Libraries also have events like lecture series and movie nights that they offer for free (or very low cost) to save money when you want to go out.
But most importantly, remember: How you budget your money is up to you. If you don’t actually care about your morning coffee and only go so people at the office will stop bugging you, skip it! Tell them how much money you’re saving (or show them what you’re buying with the money you would have spent). You (and, to be fair, your landlord and creditors) decide where your money should go.
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Erin Steiner is a freelance writer from Portland who writes about personal finance software, practical money matters, and a number of other topics. She is frugal to a fault…except for movies. Movies are her budgetary kryptonite.