Saving money can seem like an impossible task when you have many financial obligations to fulfill. But there are always ways you cut expenses without straining your day-to-day life. One common life advice on budgeting is to do it with a purpose. Determine whether you want to save to pay for college, get a deposit for a mortgage, or to renovate your home.
The following are some ideas on how you can create a better budget from your income.
Start an Emergency Fund
You may set aside about a third of what you earn every month for an emergency fund. If you start small and stay committed, you’re bound to be encouraged even by the short-term results. For example, saving only $30 a week will amount to a total of $1620 after a year.
You can always start saving by cutting down expenses in a way that will not inconvenience you. It only requires making a few adjustments in your attitude and habits. The first step is to establish your spending patterns.
Track your Spending: Break down your expenses for each month, and include your recurring expenditures such as medication, rent, and utilities. You can make tracking your recurrent expenditures easier by keeping all your receipts. Organize the receipts in categories, for example, utility bills, groceries, etc. At the end of the month, evaluate the records to determine what takes up most of your expenses.
Develop a Plan: You can only develop an effective plan when you are clear on how you spend your income. Determine how much you want to save and for what purpose. Zero down on those items or services that you can comfortably eliminate from your lifestyle.
Commit to your Plan: Keep your goals specific, measurable, and attainable. That means you should set benchmarks to periodically examine whether you are still on track. You can set up an automatic charge that will transfer part of your income to your account. Stays committed to the savings plan, and use the money for emergencies only.
Start an IDA Account: An Individual Development Account is a financial tool developed for low-income earners. It applies the matched savings formula; for every dollar you save, a dollar is added to your account. You may be required to attend financial literacy lessons before you are eligible to have an IDA account. The goal of the account is so that low-income households can gain financial literacy and have the funds for emergencies, investments, or asset accumulation. With IDA, you can budget for college, buy a new HVAC, or use it as part of a healthcare emergency fund for a future visit to the clinic.
How to Avoid Impulsive Spending Habits
Another common lifestyle advice is to always be conscious about how we spend money. But we quickly forget once we get the paycheck. However, there are several habits you can develop so that you are always aware of your spending:
- 24-Hour Rule: The 24-hour rule is based on the idea that we buy a lot of things we don’t need, purely on impulse. You can avoid acting impulsively with your purchases by delaying your decision-making process. For example, if you have just seen the finest used boat for sale, you ought to delay for at least one day before buying. The bigger the purchase, the longer you should wait. Even if it is an excellent deal, give yourself time to reflect on it, if only to avoid the guilt that could haunt you later.
- Change how You Calculate Expenses: Another way you can stop impulsive spending is to change how you look at the price tags at the store. For example, before you buy a product, consider how much of your working hours it costs you. If you earn $20 an hour, a $100 Smartphone would be equivalent to five hours of your work time. That way, you can intuitively understand the financial implications of each item you buy. When you realize how much the fancy bike from a motorcycle dealer is worth in man-hours, you are less likely to be rash.
- Digital Platforms: Digital tools and platforms such as email and social media can also trigger impulsive buying behavior. You may be getting all manner of email lists from web developers, lawyers, and internet marketers. They can also act as a distraction that limits your productivity. Make a point of unsubscribing from all non-essential communication in your inbox. Every email is required by law to have an unsubscribe feature that will instantly stop the messages.
- Be thorough with Significant Expenses: You don’t have to double-check small purchases like groceries. But for significant commitments such as getting an attorney or finding a home renovator, you may want to do a thorough background check. There are platforms you can compare different attorney services and check the ratings before you can hire the service provider.
Cutting Expenses at Home
When planning your home budget, it is advisable to talk to other family members before enforcing any changes. You can arrange to have a sit down with your loved ones. That way, everyone is on board when setting the rules and limits on utilities, food consumption, and gifts.
- Family Budget Day: There are many ways you can involve other members of the family. One way is to have a no-spending day. During the 24 hours, you arrange that no one will buy or spend any money on goods or services. You can also discuss limits on gifts, such that every single person expects to receive only one gift on holidays. You can take the opportunity to discuss how much you can spend on shipping. You may consult parcel pricing experts so that you cut expenses on items transportation and shipping.
- Come up with a Food Budget: You can save a lot depending on how you spend your money on food. For example, if you spend several days a week eating out, your family can cut expenses by making dinner at home together. The household should have a list and a budget for each meal. Make sure you all stick to the grocery shopping as you had planned.
- Enhance Your Home’s Energy Consumption: There are simple ways you can cut on utility bills if you examine your electrical consumption. Is your air conditioner old and worn out? You may want to consider an HVAC rental before you can plan for a new one. By getting a rental, you can avoid energy loss, which is a more cost-effective option than running an inefficient AC unit.
- Make Your Home Weather Proof: Before the extremes of summer or winter, you should ensure your home is insulated to avoid energy loss. You could hire a professional maintenance specialist to fix the cracks and insulate holes within your home. On the other hand, go to the hardware store and get the materials you need for caulking. You could save a few dollars by rolling up your sleeves and doing it yourself.
- Do-It-Yourself: Speaking of rolling up your sleeves, you can cut down the expenditure on your budget by doing away with some conveniences. You can make your soap with ingredients you can find in your kitchen. Also, eliminate or minimize the use of paper towels. Use cloths that can be cleaned instead. Not only is will it save you money, but it is also a positive, eco-friendly habit your family ought to adapt.
- Install Efficient Components: Your electricity consumption is said to account for up to a third of your total utility bills. Installing efficient bulbs, washing machines, and clothes dryers can save you a significant amount of money. In a few months, you could have enough to buy a couch from a discount furniture store. Create a list of the gadgets and equipment to replace, starting with the most energy-intensive. Keep in mind that those appliances that generate heat like the cooker, or dryer, tend to consume more. Smart technology is increasingly being applied to home appliances to save on energy. For example, dryers have sensors that can detect when the cloth is no longer damp and stops the machine from running.
- Refinance your Mortgage: Another way you can free money from your mortgage is by refinancing the loan. In a refinance arrangement, you can get lower interest rates and reduced monthly payments. The new loan frees up equity so that you have enough money to fix your HVAC and make repairs at home. You will, however, be required to meet the qualification requirements before you can apply for refinancing.
Healthcare Costs
Healthcare in the United States is the most expensive of all the developed countries. Additionally, the cost of medication and procedures has been rising steadily in recent years.
Many users find navigating the health system to be a complex exercise. But there are always practical steps you can take to prepare yourself for the future. Some of the healthcare cost-cutting measures may include:
- Understand Your Policy: Your insurance provider may have additional policies that you haven’t explored. Most companies will have information on their website and other digital platforms. Extras in your insurance policy may include dental procedures, physiotherapy, chiropractic treatment, etc. The additional benefits can eliminate the need to pay for certain types of specialized care.
- Shopping for medication: You can get affordable medication if you go for the generic option. Generics can be several hundred dollars lower in cost than using brand-name prescription drugs. Your physician can give you a CPT code to compare the price when shopping for medication. Don’t just look at your local pharmacies, also make a point of checking supermarkets, and wholesale prescription drug outlets.
- Save with Preventive Medication: Most people ignore routine checkups and treatments. Just because you do not sense the symptoms does not mean you do not require immediate evaluation. When health issues such as cavities and gum disease are detected early, they can reduce the cost of extensive procedures. Going for an examination at your dentist or physician office typically takes 30 minutes to an hour. The visit to the clinic is not only a boost to your budget but also a plus to your overall health and well-being.
Entertainment Expenses
Even though entertainment accounts for only 5% of most households’ expenditure, it is more than what Americans spend on housing and transportation. According to the Bureau of Labor Statistics, the average amount spent on entertainment for each household was $2,500.
By making some wise choices when choosing entertainment options, you can free some money from your monthly budget. People tend to forget expenses when they are having fun. Here are a few tips on reducing your entertainment expenditure.
- Volunteer: If you frequent events and want to save on tickets, consider volunteering. Many concerts offer voluntary positions that come with some benefits.
- Consider using Free Resources: If you are looking for audiobooks, movies, or documentaries, there are legitimate platforms that share content for free. Some sites, like Eventbrite, have updates for upcoming events, most of which are free. Before getting any entertainment service, first, browse platforms to find out if there is a more affordable option.
- Turn Your Hobby into an income: You can turn the time you spend on your hobbies into a money-making opportunity. With digital technology, there are many ways to extract value from your passion. If you love traveling, you could hire a web developer to assist you in putting up a sleek blog. You can sell your artwork on platforms like Etsy, eBay, and Amazon.
- Use Discount Coupons: You may also save by collecting coupons, especially those for dining. Some sites have discounts that range from $3 to $20. If you manage to get several coupons every month, it will free up a significant amount of money from your budget.
Bottom-Line
While it is important to save, it is wise to keep in mind that cheap can be expensive. Whether you are buying clothes online, or want to hire an internet marketing agency, the lowest price could prove to be disastrous in the long run. Keep your eyes open and always question any deal that seems too good to be true.
