Fixed expenses are roughly the same from month to month. Fixed needs are things like rent, utilities, car payments, student loans, insurance, basic phone service, and ongoing healthcare expenses. Fixed wants are typically subscription entertainment services, such as cable television bills, premium phone service, and high speed Internet (unless necessary for your business). Flexible expenses vary from month to month. While they often have a minimum required cost, most people spend more than that. Flexible needs are things like food and clothing. Flexible wants are typically entertainment, alcohol, hobbies, electronics, and other items that we may treat ourselves or our loved ones to. Some banks and credit card companies offer free automated software that tracks your spending and can create some of these categories for you.
Do you have enough money after bills and savings to cover your typical spending habits? If not, reduce your expenses. Look first at flexible wants, then to fixed wants and flexible needs for areas you can improve. [5] X Expert Source Trent Larsen, CFP®Certified Financial Planner Expert Interview. 22 July 2020. If your income is irregular, such as most retail workers who don’t usually have fixed schedules, start with an average of the last six to twelve months.
What constitutes a larger purchase will vary depending on your income level. The two biggest purchases for many people would be a car or a house. Both of these should take a lot of research and time before committing to. However, while most workers would consider things like furniture, appliances, and electronics to be big purchases, very high earners may not. Conversely, while some may consider a superfluous pair of shoes or a new book to be a major purchase, others may view them as trivial.
Seal cracks in your home to better insulate it and reduce the need for heating and air conditioning. [7] X Research source Set your thermostat to a higher temperature in the summer and a lower one in the winter. Unplug appliances when not in use[8] X Research source and remember to turn off the lights. Change your computer’s settings so that it enters a very low-consumption “hibernate” mode when you’re not using it. When buying new appliances, go with ones that have energy-saving features. [9] X Research source
Many Americans overspend by eating out often, especially when it comes to lunches at work. [13] X Research source [14] X Expert Source Trent Larsen, CFP®Certified Financial Planner Expert Interview. 22 July 2020. If you resolve to prepare a majority of your meals at home, you will be able to save quite a bit of money each month.
Always pick the item with the lowest cost per unit. While many people assume the biggest version of an item will be the best value, that is often not the case. [15] X Research source If you don’t want to do the math yourself, many grocery stores will even list the cost per unit next to the item.
It can be easy to be peer pressured into unnecessary spending if your social group spends its time at expensive bars and other venues. Instead of dropping your friends, start suggesting or planning lower cost get-togethers. Have a movie night at your house instead of the theater. Host a casual potluck instead of catching up at an expensive restaurant. Go to a public park instead of maintaining an expensive gym membership.
If you use these services regularly, downgrading may still be an option. Do you pay for a movie rental service that includes both online streaming and physical discs but find yourself exclusively streaming content? Switch to a cheaper plan without the discs.
Sell smaller, easily-shipped goods through online shops or auction sites. Try to sell large, bulky or very inexpensive items locally. Remember that your time in valuable, and it may not be worth the effort of posting a listing and mailing something that sells for a dollar. If you can, pretend any additional income doesn’t exist. Instead of factoring it into your monthly budget, put all of your extra income into savings.
If you enjoy making potentially marketable products, try selling your work on a popular craft site. Popular items typically sold include clothing, stuffed animals, beauty products, art prints, and jewelry. Until your savings reaches a comfortable level, avoid starting businesses with large startup costs. Stick to projects that use materials that are inexpensive or you already have available. You are also likely to start spending less. If your Saturday nights become devoted to babysitting, you’ll save money by not going to the movies or running up an expensive bar tab. [17] X Research source
Check your lease and local laws before you sublet. Generally, your landlord must be informed about the sublet or you may risk eviction. [18] X Research source Be cautious about who you rent to, especially if you’ll be living with them. Remember that your safety, property, and (if subletting) credit may be in jeopardy if you aren’t careful. It’s best to find potential tenants through mutual friends and coworkers. [19] X Research source Run an inexpensive background check on all potential renters. [20] X Research source Are you going on a long business trip or vacation? Consider short term renters while you’re away. Alternatively, if you live in a city like Austin or San Diego that has annual events that draw huge crowds, you may choose to stay with a friend and rent out your place for its duration at extremely high rates. [21] X Research source [22] X Research source
