Are your rainy day funds looking a little dry? Not sure you are spending your money on the right things? This is where budgeting comes in: a budget is mindfulness for cash, the best way to keep your spending clued in to the moment. Everyone’s going to have different standards for where they’re willing to spend and pull back, but when surplus money is short, it’s perhaps best to consider splurging in ways that simplify, rather than complicate, one’s life. In other words: if you’re going to spend, spend in ways that bring the most buck and/or bang.
The financial services company TIAA recommends that 20% of your income should go toward savings, 50% to necessities, and 30% toward discretionary items. 30% is a decent chunk, but in tight times such as these, 50% might not be enough to cover the must-haves (rent, food, a sweater without holes), thereby forcing the average saver to pull back a bit on what’s considered “discretionary.” Set a budget, and consider your spending habits in these three key areas:
Nowhere is the line between “necessary” and “discretionary” blurrier than when it comes to food—without it we starve, but maybe pork belly and artisan paninis aren’t a daily necessity. When you pay for groceries, you pay for the ingredients of a meal. When you pay for meals at a restaurant, you pay for the same but with the added cost of the labor for someone to prepare those ingredients, bring them to you, and wash your dishes.
Bloomberg reported last year that Americans spend more on eating out than groceries, a dangerous habit for the cautious spender. There’s nothing wrong with occasionally avoiding your kitchen, but being a bit more selective about when and where you splurge on grub can free up more stuffing for that piggy bank that’s currently starving under a pile of Chipotle wrappers.
Consider this: Save eating out for social events or brutally packed days. It will allow you to kill two birds with one stone—thereby enhancing the spending value. You don’t need to cut something out entirely to make a good financial move.
Let’s say, for example, that right now you stop by the coffee shop on the way to work for a latte and a muffin for $8. You’re spending $40 a week, which can really add up. What if you only let yourself do this on Mondays? Now you’ve cut that down to around $40 a month, instead.
Staving off boredom doesn’t have to cost a lot of money. A Netflix account rings in at under ten bucks—about two-thirds the cost of a single adult ticket at the movies. Again, there’s nothing wrong with going to the movies, but if you limit it to social engagements or movies of severe interest, you’ll have more cash on hand to spend elsewhere. A big-budget insta-classic like Star Wars on the big screen: probably worth it. Kevin James: highly Netflixable.
Consider this: Movie theaters/live shows/bar-benders are for special events, and library cards, as always, remain free—unlike purchasing a book you’re likely to read once (be honest, smart-phoner—if at all). You can use the app OverDrive to check electronic or audiobooks out from the library. Use the entertainment your taxes are paying for first, then splurge on only the most un-missable concerts, movies, and events.
Macklemore pounded this into our heads years ago—thrift/second-hand stores can be a gold mine for clothing necessities. Plus, spending your food budget on a new, super-stylish coat might make you look glamorous, but there’s a limit to how much Top Ramen an adult can consume without skyrocketing their medical premiums. Nothing wrong with a vanity purchase here and there, but remember: the nicer the jacket, the holier the underwear. Odds are you can stand to put off exorbitant clothing purchases and save them for necessary items—cool-but-comfortable boots, business-casual multi-purpose stuff—rather than a closetful of shiny floor-clutter.
Consider this: See how long you can go buying everything but underwear/pj’s/socks from thrift stores. You might be surprised at what you find and how much you save.
You’re going to buy some nice things in life, which is ok. But you may as well spend smart—in ways that cover necessity as well as life-affirming discretion. If you allow some overlap between survival and enjoyment, you’ll free up some cash for the future—a safety net that will bring you more peace and comfort than any impulse purchase.
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