When it comes to saving money, many people picture cutting coupons or shopping for deals. Maybe buying less brand name goods, or scoring discount tickets to movies will help you spend less!
However, this is a spending-focused way to try to stop spending as much money. It’s not as effective as critical money management, which always involves crafting a budget.
Crafting a budget isn’t glamorous. It’s not fun, or sleek, but it is how you can start to think critically about your money. It’s also one of the best, and most surefire, ways to save money in a reliable way. Here’s what you need to do to start thinking about your finances in a more critical way.
Bust open your checkbook and see what your expenses are. We’ve all got them: bills, subscriptions, trips to fancy restaurants. Break these down into their own separate categories. You’ve got the expenses that cover being a living person who needs shelter and food. You have to live somewhere, and you have to eat.
No one wants to live in a hut and eat nothing but beans and rice, but you should still try to keep these expenses modest. If you’re spending more than half of your income on just your lodging, you need to move somewhere more affordable. Try to make your rent or mortgage cost about a third of your income, if you can.
As for food, the same is true. You shouldn’t be eating bland, boring food all the time. However, you also should try to avoid eating at restaurants every day. Making your own food at home is much more sustainable.
Your utilities are part of living in a home. Water, electricity, internet, those sorts of things. You also likely have a cellphone bill. Insurance on your home is part of this. If you own a car, paying that debt and its insurance is also in this category. This is the stuff that, while not non-negotiable, are expenses that you need to expect to cover.
You can shop around for the best prices on insurance, phone service and the like. However, utilities are typically pretty locked in, and there isn’t much you can do about them.
After that, you get to the money you can actually control. This is normally your “fun money,” but, by making a budget, we can take control of where it goes. Once you know how much you have extra after each paycheck, you can start to think about the best ways to save this money.
Remember, the most important part of saving money is simply not spending it!