When it comes to living better, we often think of spending money. However, it’s possible to live better by doing the opposite—spending less.
By controlling spending in all aspects of life, you will experience far less stress because you are much less likely to have financial emergencies. You may also be able to maintain a high quality of life by diverting money you may be wasting and using those funds to buy things that add value to your life. Additionally, you may even be able to get the same products or services at a lower price.
The way to put budgeting into perspective is by thinking in terms of fixed and variable expenses and setting aside money for savings.
Fixed Expenses
A fixed expense is one that remains the same from one month to the next. Mortgage and rent are fixed expenses. A fixed expense can change a little, but it should vary within a predictable range. For instance, your utility expenses may fluctuate from $89 one month to $101 another month, but you know that they are within a $100 range and can plan for them.
How to reduce fixed expenses:
One thing you can do to manage these recurring expenses is to search for the most competitive rates. Car insurance, home utilities, credit card rates and so on vary from one provider to another. In fact, even electricity costs can be reduced if you live in an area that allows numerous energy suppliers to offer competitive energy rates. If, for instance, you live in the Dallas area, you have quite a few options. When looking for an electric provider, Dallas users should do more than just evaluate the lowest rate and actually look at each plan’s fact sheets to get a better idea about base charges, usage credits, green energy products, free weekends and cancellation fees.
When you think about it, even small reductions in monthly spending can help save money for future needs.
Variable Expenses
A variable expense is one that fluctuates because you can either decide to spend or not to spend on certain things. Everything you buy from a store is a variable expense. When you go to the grocery store, you can decide on one brand of coffee over another or not to get any coffee at all. You decide what you need and how much you want to spend. Variable expenses include groceries, personal care products, gas, and parking, daycare, eating out, and going to the movies.
How to save on variable expenses:
Before you determine what variable expenses you should keep and what you should reduce or eliminate, you need to make a list. Keep notes for a week or two on what you buy from grocery stores, coffee shops, clothing stores, and so on. Once you have your lists, then decide what things provided value and what things proved to be a waste of money.
Naturally, you don’t want to be too strict, deciding that you won’t spend any money on something that isn’t absolutely necessary. You may want to keep some things that add a little pleasure to your life, like a cappuccino on Monday mornings; remove some things that don’t add much value, like sugary donuts that make you feel lethargic; and reduce some things that you don’t need to do as much, like going out to eat every evening or to the movies every weekend.
Savings
Savings aren’t just about spending less on something, but it also includes setting money aside for a future need. Besides spending money, it’s always a good idea to save some, too. You don’t need to spend everything you earn, but can put some money aside.
Here are 5 good reasons to save:
- 1. Save money for investments so that you can become financially independent someday.
- 2. Save money to buy a big purchase like a car or a home.
- 3. Save money to manage unforeseen expenses or emergencies.
- 4. Save money for a vacation.
- 5. Save money to afford the tuition to get skilled up in something you’ve always wanted to do.
Budget Advice
Budgets are not easy to make. It often takes tremendous will power to sit down and think about how much money is coming in and how much is going out. Many people avoid creating budgets because they find it psychologically painful. If you can’t even force yourself to sit down to create a budget, then get someone to help you with it. This could be a supportive family member or a professional financial advisor.
Once you’ve set up your budget, it can be difficult to maintain. You tend to lose track of the money flowing in and out because you’re so busy. The fact that it took a tremendous amount of patience and time to create a budget in the first place may not be enough to motivate you to keep your budget up-to-date. The way to get around this obstacle is to set aside a time each week to update your budget.
Finally, once you get the hang of budgeting, you will find ways to do it better. You might begin to use better budget tools, like a spreadsheet instead of a notebook or software instead of a spreadsheet. You will also get better at knowing how to tweak your budget so that you can live better without compromising your lifestyle.
