Cutting Your Monthly Budget: Where to StartMarch 5, 2020
A monthly budget is not always one-size-fits-all. You may find a budget that works perfectly for a little while, but your financial situation is not likely to stay the same. Big life changes can come along, both planned and unplanned, that require a budget adjustment.
Whether preparing for a new baby, saving for a down payment on a home, or going through tough times such as a job layoff or large medical bills, you may find yourself cutting the monthly budget. If your monthly budget already seems tight, it can be hard to determine the best place to start. Here are a few quick tips for cutting back on your monthly expenses:
Cutting a budget for significant life changes pays to start early. Some can be easier to prepare for than others – a new baby comes with a few months to save as much as you can, and a home can be purchased on your own timeline when you are financially ready. You may try to plan your life as much possible, there are always unexpected changes and challenges.
Even if there are no planned life changes on the horizon, it is essential to build up a solid emergency fund. The general rule of thumb is to save around three to six months of living expenses. A solid emergency fund ensures that when times get tough, you will have something to fall back on.
Assess Your Variable Expenses
When cutting your budget, looking at your variable expenses is a great place to start. Your variable expenses include amounts that fluctuate every month. Examples of variable expenses are groceries, dining out, entertainment, and clothing.
Variable expenses are good to start with because you control how much you spend in these categories, and they are often easiest to cut back on. As much fun as going out for dinner and a movie is, it may be considered a luxury for the phase of life you are in. Making meals at home is exceptionally less expensive than eating out. In addition, renting a movie or having a game night at home with the people you love can be just as satisfying as a night on the town. To save money on groceries, looking into the benefits of meal planning can be helpful.
Find Ways to Slash Fixed Expenses
Obviously, you may not be able to immediately cut back on expenses such as rent, mortgage, car payments, or education loan repayments (although you could possibly refinance student loans to save you money or lower your monthly payment). However, there may be other fixed expenses that you can eliminate. For example, cutting out cable – even temporarily – can save you a surprising amount of money. If you have a landline, you might be able to get rid of it and solely use your cell phone. Utility bills can rise in the winter months, so ensure you are diligent about turning off your lights, unplugging appliances, and not turning up the heat too high. If necessary, do some research to make sure you are getting the best deals on cell phone service, internet, and car insurance. While you won’t be able to completely exclude all of your fixed expenses, with a little effort, small savings spread over several categories can add up to a cumulative amount that creates more flexibility in your monthly budget.
Getting Through Tough Financial Times
Throughout life, there are many circumstances that may change your income or expense levels. Whether you are cutting back to consciously save up for an exciting life event or to unexpectedly adjusting to a financial challenge, it is essential to reevaluate your budget to adapt when these changes occur. Though it may seem daunting at first, you might be surprised by how much you can save when you put forth the proper thought and effort.
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