Managing your household budget can be challenging – especially when you are forced to cut back on some expenses. Trimming your budget is not easy for everyone. This is especially true if you already got used to a particular lifestyle. However, if you analyze your budget carefully, you can find a lot of areas that you can choose to cut back on.
According to the data from BLS.gov, the average annual expense of consumers from July 2014 to June 2015 os $54,992. That means the monthly expense is around $4,582.66. Most of the expenses increased compared to the same period the previous year, except for gasoline and cash contributions. The income before taxes also increased and thankfully, it was bigger than the growth in expenses. The income growth was 6.6% while the expenses only grew by 5.9%.
But despite that, it is evident that consumer spending continues to rise each year. If you need to increase your extra money, you should consider analyzing your expenses so you can lower some of them. While there are certain budget categories that you should never sacrifice, there are many small ones that you can surely spend less on. The data revealed that entertainment expenses grew by 8.7% and apparel spending grew by 12.6%. These are areas that we do not suggest you eliminate from your budget but it can be something that you can spend less on if you really have to.
3 questions that will help decide what to cut from your budget plan
Before you start cutting back on your expenses, it is important to think about the reason why you are doing it. Spending less will require you to make changes in your lifestyle. It will be harder if you are forced to change habits. You need to focus on the reason why you are cutting back on expenses to help motivate yourself. Otherwise, you might give up and pursue your old lifestyle. Or you might go on a shopping spree when you end up feeling too frustrated about your tight household budget.
One of the popular reasons to cut back on expenses is when you need to spend on an emergency event. According to a study published on Bankrate, 23% of respondents revealed that they will pay for an emergency by lowering their expenses. If you will be forced to do this, you need to choose the right expenses to trim. You can do that by going through all your expenses and asking the following questions as you go along.
Is it necessary to survive?
Start by asking yourself if that expense is necessary to survive. If you can survive without it, then you can opt to remove it completely from your expense. However, if you need it to survive, then you cannot remove it from your list. You need to continue spending for it because, without it, the quality of life that you and your family will have can be compromised. These expenses usually include shelter, food, drinks, and utilities. Do not compromise these expenses even if you have to trim your budget. You can probably cut back on them but you cannot afford not to spend on them at all.
Does it involve a creditor?
Another question that you need to ask yourself is whether or not an expense involves a creditor. For instance, your credit card payments may not be a necessary expense for your survival but it is still an important bill that you have to pay. You should consider this as a priority because failure to pay your debt can destroy future financial opportunities. Any bad debt habit will ruin your credit score and compromise your ability to get a loan, get business partners, and even a new job. If your household budget cannot accommodate all your debt payments, you should probably negotiate with creditors so you can work out a payment plan that you can afford. If you can lower your monthly debt payments, it might give you more room in your budget.
Is it a want or a need?
When you are down to your basic necessities and you still have to cut back on your expenses, you need to revisit the necessary expenses and ask yourself if it is a want or a need. Here’s an example. A shelter is a need. However, living in a 5-bedroom home is a want. If there is only 4 in the family, you can probably live in a 3-bedroom house – or even a 2-bedroom apartment. The smaller the home, the less you have to spend on it. Another example involves food. It is a necessity but eating out is a want. Cooking your meals from scratch in your kitchen is the best way to keep costs down.
Answering these three questions truthfully should help you identify which expenses should be removed from your household budget and those can you need to drastically scale down. Just remember to make your budget realistic. Even if you scale it down dramatically, as long as it is realistic, then it should not be too hard to commit to it.
Techniques to make a tight budget seem enjoyable
Most of the time, people fail in their budget because it keeps them from enjoying life. Well if you are forced to live on a tight budget, you need to accept that there are sacrifices that you have to make. But that does not mean you cannot make it enjoyable.
According to the study published on FederalReserve.gov, there are 76 million American adults who said that they are “struggling to get by” with their income. It is also revealed that 22% of working adults have multiple jobs – probably because one cannot sustain their cost of living.
It is a fact that people are having a hard time sustaining their lifestyle choices because the inflation rate is rising a lot faster than our income growth. We really have to contend to living on tight budgets just so we have enough money to put aside for the rainy day. While there is nothing that we can really do about this, we can use the following tips to help make everything bearable.
Know your priorities.
You can begin by having a firm grasp of your priorities. If you have to create a list of the expenses in your household budget, make sure you rank it according to your priority. Make sure the priorities are always funded to eliminate the stress associated with your inability to pay it off.
Find a cheaper alternative for wants.
Whoever said you can really give up on all your wants? You can still indulge every now and then but always look for the cheaper alternative. There will always be an economical way of doing things. If you need new clothes, there are great finds in the thrift shop. If you want a great looking garden, you can try to learn how to care for it yourself. If you are resourceful enough, you can be a smart spender while enjoying all the “wants” in your life.
Make sure you budget for fun.
There are cheap ways to have fun. For instance, an afternoon of fun with the kids can be spent having a picnic in the park. You do not have to go to the mall. The sunshine and the outdoors will do you all some good. And best of all, it will not cost you a lot of money. If you want to hang out with friends, avoid eating out. Invite them over for dinner and ask everyone to bring something.
Here is a video that will give you tips on how you can survive on a tight budget.
