Don't Cut All the Fun Stuff From Your Budget to Save Money. Do This Instead
Sticking to a budget can be really difficult if you're constantly depriving yourself. Try this technique that's a lot more likely to be effective.
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Budgeting is something most people don't really like doing -- and so they don't do it. In fact, an older Gallup study found only 1 in 3 households actually had a detailed budget. And even for the minority who do make a plan for their spending, that plan is not necessarily always going to lead to financial success. That's because close to 85% of budgeters indicated they've spent more than the limits they set for themselves.
As explained below, there's actually some good reasons why most people have such a hard time sticking to a budget in order to increase their savings account balance -- like the fact that a strict budget can feel like a deprivation diet that leads to binge eating, and the fact that constantly depriving yourself can be really hard to stick to.
Fortunately, there's a better alternative to reduce what you spend than trying to rule over your finances with an iron fist and prevent yourself from ever doing anything fun with your money.
Cutting the fun stuff from your budget isn't going to work in the long term
If you're hoping to save more money for financial goals (either in a savings account or by investing in a brokerage firm), the obvious solution may seem to be making budget cuts by reducing "unnecessary" spending.
Unfortunately, the kinds of spending usually classified as "unnecessary" that most people try to reduce are often the things that bring joy to life. For example, you might decide that you're spending too much on dining out or your daily latte or buying shoes. So, to put more in savings, you might commit to making coffee at home or eating out only on rare occasions or skipping the shoe purchases altogether.
By doing this, you end up setting yourself up for failure because you're going to be continually forcing yourself to give up everything that you want, all the time, potentially for months on end. It's kind of like going on an all-salad diet. Eventually (and it probably won't take long), you're going to cave and get a big dish of ice cream or eat that cookie.
The problem is, if you're basing your ability to succeed in savings on giving up the cookies, this can be a huge problem that makes it a lot harder to succeed in managing your money.
Instead of stripping the fun stuff from your budget, try this
Rather than trying to save more and spend less by living on a deprivation budget and cutting out everything you do that's fun, it's going to be a whole lot easier to keep your fixed expenses low. These are the expenses you have to pay every single month on a recurring basis. They include bills like your rent or mortgage payment and your car payment.
You can reduce the amount you're spending on these expenses by making one single decision just one time. For example, you could decide to buy a used car instead of a new one. With the average monthly payment for a new car coming in at $736 per month in the third quarter of 2023 compared with an average payment of $567 for a used car, this choice alone could save you $169 a month -- the equivalent of giving up around 46 days worth of small lattes.
Now, what sounds easier to you? Giving up the dream of a new car one time at the car lot or passing up the morning coffee that makes you happy every single morning for life?
Obviously, if you already have a house or a car, it can be a little harder to do this. But it may be worth finding a roommate to cut that housing cost or selling the new vehicle for a cheaper new one. And going forward, you'll want to be sure to do all you can to keep those fixed costs down since doing that is a lot easier than stripping every single fun thing from your budget to make saving possible.
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