Once you have a budget in place and are following it (or at least trying to), your next step involves tweaking it. Your first budget is sort of like a first draft, and it may need some editing to fit better with the way your money actually flows in and out. Plus, life changes constantly, and your budget needs to change with it.
If you find you’ve spent more than you budgeted for the month, don’t despair. Use the information as a learning tool to improve your budgeting for the future. Your budget will get more refined every month, and you’ll get better and better at managing your money and working toward your goals. If you find after a month or two that tracking every expense is too much work, consider combining some categories, such as miscellaneous household expenses or utilities, to reduce the record keeping, rather than giving up.
As you readjust the categories, look for areas where you can save money. Remember, the idea is not to deprive yourself but to funnel as much of your money as possible toward the goals that are most important to you. As your personal situation changes, reflect those changes in your budget. Examples of changes that should prompt an overhaul of your budget include the following factors:
Spending leaks can be the result of impulse buying, unused memberships, bank fees, and other small expenditures that add up to a lot by month’s end. Impulse spending, or buying things you don’t realize you want until you see them, is often the result of powerful advertising messages that are so appealing you buy things you don’t need and often end up not using. Forgotten memberships (like a gym or a streaming service) on auto-pay drain your budget every month even though you never use them. Bank fees can really add up, so make sure you know every time the bank pulls money out of your account.
Impulse buying can quickly run up credit card balances, leaving you to deal with debt for a long time. Plan your purchases and don’t buy anything on the spot that wasn’t part of your plan. If there’s something you feel you really must have, think about it for at least two days, and if you still want to buy it, make sure you have enough cash to cover it and do a little comparison shopping first so you don’t overpay.
Grocery shopping is one area ripe for cost cutting. Do you buy a lot of prepared foods instead of doing the cooking yourself? There’s a trade-off between the cost and the convenience of prepared foods when you’re too busy to cook. Snacks are another expensive item, especially if you buy the single-serving packages to include in the kids’ school lunches. Consider buying family-sized items and repacking single servings into baggies to save money. Other cost-cutting tips to consider include buying generic brands and using coupons whenever you can.
Look for Tech Deals
Shop for phone and Internet service deals twice a year. Media companies are constantly changing their plans, and you could save a chunk of change. Be sure to read the fine print and ask specific questions.
If eating out is a lifestyle instead of a treat, consider cutting back on restaurant food and making more meals at home. Limit dining out to once or twice a month. Those special meals will feel like treats, and you’ll end up spending less money.
What’s the deductible on your auto insurance? It should be at least $250, and if you have a good driving record, $500 is even better. The certain cost of paying higher insurance for a lower deductible weighed against the likelihood of having an accident is a balancing act. If the car is more than eight years old, consider dropping collision coverage altogether, and just keep liability coverage on that vehicle. The cost of collision coverage on a car that is worth only a few thousand dollars is out of proportion to the benefit you receive, especially if you have a good driving record.
These are just a few ideas to get you thinking about how you can cut costs. As you go through each item in your budget and on your net worth statement, question everything and look at things from a different perspective. Look for ways to save on your biggest expenses—cutting those will free up more money in your budget than reducing a bunch of small expenses.