Even when you live modestly, expenses can add up quickly. Fortunately, a budget can stop you from overspending and help you find room to save money. While it may seem tricky to set cash aside, we’ll show you how to live on a budget (and even stretch it) and save $1,000 or more in a year.
How to Build a Budget
Don’t know where to start when creating a budget? That’s okay. There are plenty of in-depth guides to budgeting, but we’ll share a few tips here.
First, calculate how much you make in a specific period (one week, two weeks, one month) to see what your budget is for that period. Next, figure out the cost of your non-negotiable expenses (like rent, groceries, utilities, car payments, and gasoline) and decide how much money you want to set aside for savings. When you set aside money before addressing non-essential expenses, you make sure you’ll have money in the bank for the storms of life or your future plans.
After you subtract the money for savings and essential expenses from your total budget, you can allocate the rest of your cash depending on how you prioritize certain things. If you love going to restaurants with friends or seeing concerts, you might want a larger budget for eating out or entertainment. If you’re a sports fanatic, you might want to spend some of your remaining money on a nice cable package. Assign money for non-essential expenses based on your goals and interests up to your budget’s limit. Then, track your spending using one of these handy apps to make sure you reach your financial goals.
How to Live on a Budget
For many people, creating a budget is easy, but sticking to it? That’s a different story. So, how do you make sure you’re staying true to your budget? Well, we’ve got seven tips for you to try out.
1. Plan Out Your Meals
One of the easiest categories to overspend in is food. If you’re not careful, you could end up eating out more than you intended if food runs out at home, or you might leave the grocery store with a larger-than-anticipated receipt from not planning. To avoid this, plan out budget-friendly meals for breakfast, lunch, and dinner ahead of time and purchase accordingly.
While your budget is personal, avoid going over the USDA’s monthly estimate for a single thrifty shopper age 19-50: $175.60 for females and $197.70 for males, and $410.60 for a family of two. So, instead of eating out, recreate your favorite restaurant’s meals at home! Plan one meatless money-saving recipe a week! Use coupons, eat out on food holidays, make large meals to stretch a few days, and avoid buying special one-time ingredients.
The average price of a meal from a fast-casual restaurant (think Chipotle, Five Guys, Shake Shack) is roughly $12, according to Franchise Help. If you plan out your meals and avoid two unplanned trips to such restaurants each month, you could save $288 a year.
2. Rethink Your Credit Card Approach
Chances are, you might have a credit card. After all, Experian’s 2020 Consumer Credit Review found more than 90% of American adults with at least one credit card on their credit report. But depending on how you use your card(s), there could be room for you to save. Some cards have high-interest rates, meaning if you carry a balance, you’ll be paying for it in a big way with sizable interest payments. Try to avoid these high-interest cards and pay off your entire balance whenever possible. Also, if you’re about to sign up for a new card, be sure to research which ones offer generous cashback or points bonuses.
For example, if you earn $250 in cash back by paying for your usual expenses (gas, groceries, eating out) throughout the year, that’s $250 back in your wallet. If the credit card has a cashback match, it could double to $500.
3. Have Money-Free Days or Weekends
One of the best ways to cling tight to your budget? Don’t spend at all! While you can’t avoid spending forever, you might be able to for a day or weekend. Choose a time period and challenge yourself not to pull out cash or a credit card. Eat food that you’ve had in the freezer for a month or two. Stream a movie at home instead of going to the theater. The average American spends $164.55 a day, according to Sunmark Credit Union, and cutting out the non-essential categories for a few days could help you bolster your bank account.
For example, eliminating the average daily spending for alcohol ($1.53), eating out ($9.22), and entertainment ($8.78) equates to $19.53 in savings. Two no spend days like this each month would save you $39.06, or $468.72 over an entire year.
4. Cancel Subscriptions You Don’t Need
Between cable packages, streaming services, and cell phone plans, monthly subscription fees or membership costs can add up. In fact, West Monroe’s survey of 2,500 people found that the average consumer spends $273.28 on subscriptions each month. Some subscriptions are probably essential for you, but there’s a chance you could be paying for one or two you forgot about, or you’re not using much. Consider canceling these rarely used services or searching for free and inexpensive ways to watch live games and events so you can get rid of your cable package.
By cutting out just one or two monthly subscription services totaling $10, you could save $120 in a year.
5. Shop When You Can Get the Best Deals
Free food days aren’t the only days you can save at your favorite establishments around town. If you do your shopping at the right time, like on Black Friday or a tax-free weekend, you can save on gifts, back-to-school essentials, and more. Depending on how much you normally buy during special shopping trips, you could save anywhere from tens to hundreds of dollars.
6. Lower Your Energy Bills
The average American household spends at least $2,200 a year on utilities, but you could lower that average bill by 25% if you follow some of the U.S. Department of Energy’s tips. By air-drying dishes and clothes, lowering the temperature on your water heater, and fixing air leaks around windows and doors, you could start to rack up some serious savings. If you don’t hit the U.S. Department of Energy’s 25% savings figure, don’t worry.
Even 10% savings on the average yearly figure of $2,200 equals $220 back in your bank account.
7. Lower Car-Related Costs
If you drive a car regularly, there are several ways you can save. Try some gas-saving tips to get a few more miles per gallon or shave off a few cents at the pump. Or find places that offer free repairs and services. You can also talk to your insurer and see if there are any discounts you are eligible for or if they have a program that monitors behavior behind the wheel and rewards good driving.
Direct Auto has plenty of Discounts and a DynamicDrive program. Switching could save you up to $1,044* on your premium, so give us a call, visit our website, or stop by one of our nearby locations for a free quote today.
*Savings data based on an 08/2021 survey of customers who recently switched to Direct and reported savings. Individual savings, if any, vary. How you buy can affect price. National General Group, Winston-Salem, North Carolina.