How To Cut The "Pork" Out Of Your Spending
Following a budget doesn’t mean you have to wait until pigs fly to get the things you want. In fact, by understanding just a few simple spending concepts, you’ll be able to fatten up your bank account in no time!
The Parts Of A Healthy Budget
Flexible Expenses: Some months your bills are heftier than others. That’s because expenses like groceries, gas, and utility bills can vary depending on the season and your personal habits.
Savings: Once you know how much your monthly expenses cost, you’ll bank the rest as savings for your short- or long-term financial goals (like going on vacation, paying down debt, or buying a home).
Income: When you bring home the bacon, that’s income. It’s the total you earn after taxes from working, as well as any other family contributions or funds you receive on a regular or irregular basis.
“Other” Expenses: Coffee, movies, concerts, clothes, takeout, Uber rides—whatever you spend money on that isn’t a necessity fits in this category. Trim the fat here to save more money and pay down bills faster.
Fixed Expenses: Likely the meatiest bits of your budget, these are your costs that remain the same every month. Your rent or mortgage, car payment, cellphone bill, and insurance are examples of fixed expenses.
Cut Back A Little To Save Big
There’s no need to go whole hog and completely give up your favorite indulgences. You can save big just by cutting back a little on the small stuff.
For example, if you’re spending ...
- Coffee: $21 per week = $1,092 per year
- Uber: $59 per week = $3,068 per year
- Lunch: $20 per week = $1,040 per year
Think about ways to spend less on those items, and what you could do with all the money you’ll save.
Not Sure How To Begin Building Your Budget?
Start by thinking about your income as 100% of the money you receive during a given month. Then, put 10% of that amount in your savings account, and another 10% toward outstanding debt. That leaves 80% to cover everything else.
Need more portion control? Put 50% toward all of your fixed expenses, and use 30% for your flexible and “other” expenses.
- Debt and savings: 20%
- Fixed expenses: 50%
- Flexible and “other” expenses: 30%
It may take some adjustments to align your finances with these percentages, but you’ll be squealing with joy when you have a budget that works for you!
American Student Assistance® (ASA) Internal Research: asa.org
Forbes Media LLC: forbes.com
Napkin Finance: napkinfinance.com
Uber Estimate: uberestimate.com