Optimize Your Budget
So, you finally did it. You sat down and created a budget and you are even sticking to it. Now what should you do? In order to make your budget truly effective you should optimize it by finding a way to trim your expenses in each of your categories.
Optimizing 101
The main key to budget optimization is cutting your expenses. I know that you get tired of hearing about curbing your spending habits, but far too many people don’t actually do it. The trick is to start small. Just remember, no matter how inexpensive something is, everything that you cut back on will quickly add up to extra cash in the bank. Go through your budget and look at what you are spending your money on. First, you should drastically cut back on the stuff that is not 100% necessary:
- Smoking - Well, of course, you should quit. However, take it slow. If you normally smoke one pack a day try to cut that in half. Physically time yourself from when you put a cigarette out until you light another one. If you watch the clock between smokes your inner voice may kick in and say “Didn’t you JUST smoke?!”
- Take your lunch - If you normally go to restaurants or fast food joints at lunch time then you should consider brown-bagging it. Once again, start small. At first, take your lunch once or twice each week. Then take it three times…until you are completely free of your fast-food temptations. (This also has the added advantage of helping you eat healthier!)
- Soft Drinks - If you drink two soft drinks at work each day, and the average drink costs no less than $1.00, by cutting out just ONE drink a day you can save yourself upwards of $300 each year! That’s one “free” car payment for some people!
- Convenience Items - If you stop by the gas station each morning and spend $2.50 on a Red Bull, $0.75 on a honey bun, and $1.20 on a pack of gum (the breakfast of champions..?) then you are paying WAY TOO MUCH for this junk. If you “must” have it then consider going to the grocery store once a week and buying all of the items in bulk. You will be amazed at the money you will save (and you should eventually get to the point of not buying this stuff at all!)
There are also a few tricks for optimizing your necessary expenses like groceries and insurance:
- Hack your grocery list - The grocery store is a prime example of how cutting small expenses will add up. Every time that you go to the grocery store swap out some name brand items for the store brands. Most of the time they taste pretty much the same, and they can save you quite a bit of money. Another thing to consider is not buying processed foods (like most of the stuff in the freezer section) Processed foods are generally expensive, and lack the taste and nutrients of home cooked foods.
- Pay your insurance every three or six months - If your insurance company will give you a better deal if you pay every three or six months then do it! The key to this is to still budget for your insurance monthly. If you pay $600 every six months then you should be putting back $100 every month.
(For more tips see our list of ways to save money)
Making it work
In order for your budget optimization to be successful there are two things to keep in mind. First, remember that no mater how small a purchase is, by cutting back just a little bit at a time your savings will start to rapidly grow. The final — and most important — thing to keep in mind is that you must start small so that you do not get overwhelmed. A key example would be trying to quit smoking, or trying to stop drinking soft drinks. Something like this can be extremely hard on both your mind and body so take it one step at a time! If it will make it easier, then try to optimize one or two categories from your budget each month.
